At the opening bell, the FBM KLCI opened slightly lower at 1,472.49 at 9.05am down 1.52 points on Wednesday as compared to yesterday’s close of 1,474.01, in the run up to external pressure over the tabling of Budget 2023.
On the broader market, decliners outpaced gainers 361 to 110, while 261 counters were unchanged, 1,491 untraded and 11 others suspended.
The sell-off on Wall Street overnight is expected to spill over to global markets as fears intensified that US interest rates are set to rise higher for longer than initially assumed.
Investors seem to be taking money off the table after a January that hinged on the US Federal Reserve winding down its rate hikes on the back of slowing inflation. However, recent economic data showing persistent inflation have poured cold water on that hope and equities are now erasing the gains made earlier this year.
RHB Retail Research cited today (Feb 22) that the FKLI continued to trade sideways near the 200-day average line yesterday as it recouped 1-pt to settle at 1,477.50 pts – still below the 50-day SMA line.
The index opened neutral at 1,476 pts and oscillated in a tight range between 1,478.50 pts and 1,471 pts throughout the session, before rebounding from the day’s low to close marginally above the opening.
The neutral price action yesterday signals the recent “Shooting Star” bearish reversal is still intact as the bears are just taking a pause below the medium-term 50-day average line.
RHB expects the FKLI to hover near the 200-day average line in the coming sessions, before trending lower in the later sessions.
Riding on the “lower high” bearish pattern, we expect the index to extend its downward movement in the medium term – retreating below the 200-day average line, testing the 1,460-pt support.
Backed by the RSI momentum indicator that is printing at 46% within the negative trendline, the research house sticks to its negative trading bias. Traders are advised to retain the short positions initiated at 1,474 pts, or the closing level of 7 Feb.
To mitigate the trading risks, the initial stop-loss threshold is placed at 1,503 pts. The immediate support is marked at 1,460 pts, followed by 1,435 pts, i.e. 23 Nov 2022’s low.
Conversely, the immediate resistance remains at 1,493.50 pts – 7 Feb’s high – and is followed by 1,503 pts, or 1 Dec 2022’s high.
