Category Archives: FBMKLCI

Stock to Watch: MHB [5186]

Before we perform a thorough analysis on the price development of MHB [5186], lets take a brief look on the general market movement. As can be seen from the chart below, the index is still moving within the sideway channel (or in a rectangle). Market was weak in the morning, dragged by the poor performance of the regional market, but began to recover in the afternoon session and managed to close just below its opening, thereby forming a doji. With buyers coming in everytime the market touches the 1766 support level, it is hard to tell at this point whether the bull or the bear will triumph in the coming weeks. We need to watch the upper and lower boundaries of the sideway channel closely.

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Stock to Watch: Pantech [5125]

Looking at the chart of our local index, we can see that the index is now consolidating within a 28 points range (Resistance of 1793; Support of 1765). A spinning top was formed on Thursday with slightly greater volume than the previous days, signalling a possible reversal. In fact, with both the Hang Seng (Hong Kong index) and Nikkei (Japan index) forming long lower-tail spinning top with high volume, the possible reversal of these two leading market in Asia could potentially pull our index up on Monday, thereby creating a better sentiment for shares to reverse/ move higher.

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Having said that, there are still plenty of oppportunities for us to tap on and among them is the popular oil and gas small-cap, Pantech, which would be the focus of today’s discussion. While the expected better sentiment on Monday could turn the share price around, thereby taking away the opportunity to profit, it would be best if we could get ourselves ready in the event that the expected better sentiment does not materialize (Possible since at the time of this writing, US index is falling).

KLCI: The Inevitable Correction


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At last, after more than a week of bullishness, the market formed a bearish engulfing pattern yesterday (as indicated by the red arrow) and today our local index lost 16.31 points, with the number of losers outnumbered the gainers greatly. KLCI was dragged mainly by three of the heavyweights – Maybank [1155], Genting [3182] and IOICorp [1961]. Moving on, we need to watch a few support levels closely (1752 and 1743) as there is a high chance that the index will rebound at these levels. A break of the 1743 support will send our composite index down to the resistance-turned support of 1718, which is an ultra-strong support level. Let’s take a brief look at the two “culprits” that caused the fall of our index today and see whether there’s any profit opportunity. We start with our Gaming giant, Genting [3182].

KLCI: The Biggest Rise In The History of Malaysia

Today is a remarkable day with the index closing 57.25 points higher from last Friday’s closing, creating the biggest one-day gain in Malaysia’s history, no thanks to BN’s victory in the latest general election. The index touched the high of 1824.44 in the morning before falling sharply to the 1740+ level and had been trading sideway since, within a 12-points range for the rest of the trading session. The extreme movement of the index had caught a lot of investors by surprise and most are unsure of what to expect next and what to do with their current position.

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KLCI: Pre-Election Dip

On the last trading day before the long-waited general election, the local index took a dive and broke the 1700 psychological support. The index moved down by as much as 28 points before recovering by around 10 points to close at 1694.77. This came after a divergence in the true sentiment of the market with the index movement (one of many of the signals under Sentiment Analysis) appeared on the 30th of April, sending strong signal of bearishness.

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KLCI: A Healthy Correction

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The long expected correction finally happened. This came after the index closed above the 1700 level for the first time on Thursday, causing the general public to believe that the market is about to catch up with our international peers that have been rallying since early January. The index plunged by 17 points to 1698.53 today after hitting its all-time high of 1716.47, closing the day 8.51 points lower. The bearish signal had appeared on the 10th of April where a divergence in the index movement with the overall true sentiment (as judged from the number of gainers to losers) can be seen. Such a divergence is a good leading indicator in identifying possible huge dip. By following this indicator, traders/ investors would have avoided much of the huge dip that happened in the past few years, thereby avoiding catastrophic losses on their portfolio.So how would the index perform next week?

KLCI: A Roller Coaster Ride

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An extremely volatile market it is today with the index dipping by more than 50 points in the morning in anticipation of the dissolution of parliament. It recovered gradually once the dissolution is confirmed and ended the day marginally higher than yesterday’s closing. As we can see from the chart above, the index reversed after touching the lower boundary of the upward channel, creating a total move of more than 100 points in a single day. As was mentioned in the previous post, as long as the index stays within the upward channel, we can still afford to be bullish. This bullish view is further supported by the fact that the recent upward movement had created a “cushion” that ensure any downfall caused by election fear will not alter the effective trading range. If the index were to remain at low levels in the past few weeks, then the stance would be a bearish one since a dip like the one we saw today would bring the market to levels lower than 1600, thereby changing the effective trading range (which is dangerous because the lower boundary of the effective trading range cannot be known with certainty – This means that the risk is not assessable, and the risk-reward ratio cannot be estimated).

KLCI: Preparing for The Second Quarter of 2013

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The aggressive buying by foreign funds last week had pushed our local index higher by a staggering 50 points. It stopped rising at the point where the horizontal major resistance of 1679 crosses the upper trendline of the upward channel, which coincidentally is also the Fibonacci 123.6% level of the prior uptrend. Such bold acquisition by foreign funds are partly due to the pressure arises from the poor performance of their portfolio in our market. If the index was to stay at 1625, foreign funds would have made a negative return of 3% for the first quarter of 2013, calculated from the closing price of 2nd of January 2013. By pushing few of the heavyweight of our KLCI higher (thereby causing the index to close at around 1672 on Friday), foreign funds that have exposure to our local market will only make a marginal loss of 0.2% (All the calculations above are done by assuming that the average return of all the portfolio of foreign funds are similar or close to the market return).

Moving on, the index is expected to consolidate or retrace to a lower level in the near term before rising further. As long as the index stay within its upward channel, the outlook is still bullish and any retracement that comes should be taken as a buying opportunity. We will continue to see lots of volatility in the second quarter of 2013, which represent more opportunities for profit for professional traders. For amateurs however, it would be advisable to trade the big trend and ignore the minor swings in between. Hopefully, we will see a better trading environment for the retailers in the second quarter of 2013.

KLCI: Strong Push by The Foreign Funds

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It has been some time since we last seen our index soar by more than 15 points. After closing lower than its opening for 2 days on high volume, the local index rose by 17 points and stopped near the immediate resistance of 1645. The hike in our index was caused mainly by the aggressive acquisition by foreign funds. They had, according to statistic, made a net purchase of 326million shares today. If the index manages to break above 1645 again, then the low created on the 18th of March would be the cycle low, and we would see the index forming an arc in the next one and a half-month. As long as the index stay above the trendline, the arc should be a bullish arc, meaning the end of the arc would form a higher low compared to the beginning of the arc. Looking at the current situation, it is definitely risk-on for investors although the ratio of gainers to losers for the past few days are not satisfying.

KLCI: A Change in Free-float Methodology

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Our KLCI sank deeper today after news of EU leaders taxing bank deposits in order to part-fund the bailout of Cyprus created renewed worries among investors worldwide. This came after a huge sell-down on the last 10 minutes of the trading session on Friday, believing to be due to portfolio rebalancing by funds that track the performance of our index as the methodology used in calculating the weightings of the index constituents will be changed effectively on the 18th of March. The shocking moves by EU leaders, coupled with the election fear that has been lingering since late January, is expected to send our CI lower to test the 1600 psychological support again. While our index is moving into the oversold territory and today’s candlestick is forming a long tail, indicating a possible reversal, we should be mindful that the sentiment is weak currently and any release of unfavourable news might bring our index to a lower low. Do trade cautiously.