FBM KLCI - turning bullish

FBM KLCI - turning bullish

Stocks on Bursa Malaysia closed higher yesterday in line with most regional markets, supported by persistent foreign fund buying in the finance and consumer stocks as the ringgit staged a rebound against the US dollar. Most Asian markets rose yesterday on expectations of possible delay in the US interest increase due to unexpected weak non-farm payrolls report for March. The FBM KLCI rose 8.42 points or 0.46% to 1,842.94, after hovering between 1,837.51 and 1,844.83 throughout the day. Gainers outpaced losers by 395 to 377, while 342 counters were unchanged. Total volume was higher at 1.99 billion units worth RM1.67 billion from Friday’s 1.78 billion units worth RM1.28 billion.

Continuing the uptrend from last Friday, the FBM KLCI opened 6.33 points higher at 1,838.30 but slipped lower to hit the intra-day low of 1,837.51 fifteen minutes after opening. The key index rebounded from the low and rallied higher to touch the intra-day high of 1,844.83 at mid-morning. Thereafter, the FBM KLCI pulled back on profit-taking and moved sideways range-bound for the rest of the day. Chart-wise, the FBM KLCI formed a bullish white candlestick with an upside runaway gap, indicating the bulls are rushing in to ride the uptrend, and hence, the FBM KLCI is likely to rise further today on follow through buying momentum. Immediate overhead resistance zone is at 1,845 to 1,858, while the immediate downside support zone is at 1,837 to 1,832, the gap area.

MACD was higher, and its histogram also extended higher, indicating an increased in momentum to the upside. RSI (14) rose to 66.9 from 63.7, indicating the FBM KLCI is getting more bullish in the short term. Stochastic swung upward to 97.1 from 94.4, indicating the key index is very strong but overbought. Readings from the indicators showed that the FBM KLCI is bullish, and hence, is likely to rise further on follow through buying momentum.

The trend of the FBM KLCI has turned up and bullish with the follow through buying that pushed the key index higher yesterday, the highest close since November 2014, and the key index has breakthrough the tough long term moving average resistance zone convincingly. Hence, the FBM KLCI is likely to rise further to test the immediate overhead resistance zone of 1,845 to 1,858, with 1,850 being the key psychological resistance level. A breakthrough of this resistance zone will see the FBM KLCI climbing higher to challenge the all-time high of 1,896.23 in the medium term. On the broader market, rotational play on ACE market counters and small caps will continue to keep the market alive.

Overnight, the Dow rose 117.61 points or 0.66% to close at 17,880.85. Today, the FBMKLCI is likely to trade within a range of 1,831 to 1,852.

This week's expected range: 1798 – 1858
Today’s expected range: 1831 – 1852

Resistance: 1846, 1849, 1852
Support: 1831, 1834, 1838

Stocks to watch: AMPROP, APFT, BJFOOD, COCOLND, DUTALND, EATECH, GESHEN, HOVID, HUAYANG, INGENCO, IREKA, KAWAN, MIKROMB, MUHIBAH, OPENSYS, PTB, SALCON, SGB, SYSTECH

Stock picks highlight: EATECH (5259)

Last Price: RM0.625 +0.02
Support Level: RM0.60, RM0.565
Resistance Level: RM0.63, RM0.635, RM0.65, RM0.675, RM0.70, RM0.725, RM0.75, RM0.775, RM0.80
Entry Level: RM0.625 – RM0.63

Technical Analysis

EATECH (5259) rebounded from its intra-day low of 0.60 to close higher at 0.625 after hitting the intra-day high of 0.63. Technically, the chart of EATECH formed a bullish white candlestick with increasing volume, indicating strong buying interest came into the stock yesterday. It breaks out from the consolidation range forming an Ascending Triangle pattern breakout. MACD swung upward and made a golden-cross over the signal-line, and its histogram also extended upward, indicating an increased in momentum to the upside and a buy signal. RSI (14) rose to 65.2 from 59.4, indicating the stock is turning bullish. Stochastic rose upward to 78.1 from 66.7 and is above the slow stochastic line, indicating the stock is turning stronger after recent consolidation. The medium and long term trend of EATECH is up, and the short term trend is up with the 5-day SMA above the 10-day SMA and is also above the 30-day SMA, and a confirmed breakout above RM0.0.63 will see an upside target of RM0.635, follow by RM0.65, RM0.675, RM0.70, RM0.725, RM0.75, RM0.775 and RM0.80.

Since the short term trend is bullish, day traders with shorter time frame perspective may ride on the short term bullishness and buy on breakout level (RM0.63). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM0.635, RM0.65, RM0.675, RM0.70), stop loss (RM0.595)
Mid Term – target price at (RM0.725, RM0.75, RM0.775, RM0.80), stop loss (RM0.565)

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