Thursday, April 19, 2007

Market Update

KLCI ends down 1.7% at 1306.36, off 1291.64 intraday low, in moderately active trade on broad-based selling with plantation, property stocks leading decline. The market was also weighed down by the weaker sentiment in regional bourses. The index is expected to break below 1300 support Friday given pre-weekend profit-taking, weak technicals.

A negative stochastics divergence and a break of key support on technical charts of the Kuala Lumpur Composite Index suggests that the rally in Malaysia equities could pause following 22% gains since start of this year.

Negative divergence by daily stochastics - a classic sign of a change in trend - coupled with a break below important support of 1325 on the index's uptrend line from early March suggests the rally is losing momentum.

Furthermore, the index this week looks set to post a bearish shooting-star pattern on weekly candlestick charts - a weak signal at highs, while daily traded volume has shrunk from its peak of around 4 billion shares per day to less than 2 billion since last week.

A reasonable target for coming days would be the February high of 1285, which is quite strong support for the index, and it wouldn't be surprising if the KLCI embarks on another leg up from this support. And the long-term outlook remains bullish as long as the almost decade-long uptrend line from 1998, currently at a level of around 1100, holds.

However, a break below support at 1285 would confirm upward pressure had eased, opening the way for support at the 30-day moving average of 1251, slightly above 1240, which represents the 38.2% retracement of the index's rise from early March. Subsequent support is at 1211, the 50% retracement level.

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  • CPO Futures Up Further; Exports Seen Strong
  • MIMB Says Sell Astro Based On Charts
  • Plantation Stocks Dive On Stretched Valuations
  • MSC UP; Resumes Tin Shipment, Firm Tin Prices
  • UBS Downgrades Malaysian Plantation Stocks
  • CS Ups Sunrise To Outperform, Target To MYR4.30


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