The FBM KLCI (+0.39%) closed higher as buying pressure were noticed within Utilities and Industrial Products & Services heavyweights, namely YTLPOWR (+45.0 sen) and PCHEM (+24.0 sen); the former posted a stellar result, translating to healthy buying interest, Malacca Securities (MSSB) said in a note today (Aug 23).
The FKLI managed to contain the selling pressure yesterday, climbing 7 pts to close higher at 1,644.50 pts.
At 9.15am the FBMKLCI rose +1.72 points to open at 1,643.33.
RHB Retail Research (RHB) said the index initially began trading at 1,639 pts, and traded within a range of 1,647 pts and 1,638 pts before closing at 1,644.50 pts and printing a bullish candlestick.
This latest positive price action suggests the FKLI is attempting to resume the upside movement.
The RSI is rounding upwards, which shows the momentum is gaining traction again.
In the event the positive momentum follows through, the index may climb towards the nearest resistance at 1,670 pts.
Should the FKLI revert to a correction, it may retrace towards the 1,620-pt support.
For now, as the index is trading above the 50-day SMA line, the bulls still have the technical upper-hand.
As such, they made no change to the positive trading bias.
RHB said traders are advised to retain the long positions initiated at 1,565.50 pts, ie the close of 6 Aug.
To minimise the trading risks, the stop-loss threshold is placed at 1,600 pts.
The nearest support is marked at 1,620 pts and followed by the abovementioned 1,600 pts.
Conversely, the nearest resistance is eyed at 1,670 pts and followed by the 1,700-pt level.
The Day Ahead
MSSb said that local stocks traded mixed, with investors favouring large-cap stocks (FBM KLCI up 0.4%) while avoiding smaller-cap companies (FBM Small Cap down 0.8%).
In the U.S., markets declined as all three major indices formed bearish engulfing patterns, driven by a surge in US 10-year Treasury yields above 3.8%.
Traders are now focused on Jerome Powell’s speech at the Jackson Hole Symposium, looking for hints on the size of the expected rate cut in September.
Additionally, new home sales data is due later tonight.
In the commodity markets, Brent oil rebounded after a 4-day losing streak, supported by a drop in U.S. inventories by 4.6 million barrels last week.
Meanwhile, gold prices fell below the USD2,500 level, awaiting further cues from the Jackson Hole Symposium, and CPO prices edged closer to the RM3,800 mark.
Sector Focus: Given Wall Street’s negative performance overnight, MSSB noted that they expected selling pressure to spill over to local stocks.
However, investors are likely to focus on corporate earnings, especially in the O&G sector, which has seen strong results from ARMADA, DAYANG, PERDANA, and DELEUM.
Healthcare stocks may also be in the spotlight following KOSSAN’s results and Thailand’s confirmation of the first Monkeypox case in Asia.
MSSB continued to favour the Consumer sector amid the stronger ringgit environment.
Bloomberg FBMKLCI Technical Outlook
The FBM KLCI index ended higher towards the 1,641 level.
The technical readings on the key index were positive with the MACD histogram forming another positive bar and the RSI trended above 50.
The resistance is envisaged around 1,656-1,661 and the support is set at 1,621-1,626.
CGS International (CGS) said most Asian stock markets finished higher on Thursday, with Hong Kong’s HSI (-1.44%) leading the gains.
The local benchmark FBMKLCI (KLCI) recovered 6.34pts or 0.39% to end the day at 1,641.66.
Buying interest was seen in plantation (+1.26%), telecommunications (+0.70%) and industrial products (+0.63%).
Top laggards were led by energy (-1.61%), transportation (-1.27%) and construction (-0.37%).
Trading volume rose to 3.73bn (up from 3.28bn previously) while trading value increased to RM3.08bn (up from RM2.90bn previously).
Market breadth stayed negative as 446 gainers weighed down by 616 decliners.
A minor rebound took place yesterday, recovering slightly from Wednesday’s losses.
The benchmark is likely to continue to find its base in the near term.
For now, CGS maintained their view that the current weakness is just a pullback in the larger trend.
However, falling back and closing below 1,632-1,638 (May-July highs) likely warns that the recent pop-up to 1,660 may turn out to be just a fakeout.
Coupled with the triple bearish divergence (not shown here), there is a need to be cautious.
They will turn short-term bearish if the KLCI closed below the 1,614-1,624 support.
The following support is at 1,593-1,598.
On the upside, resistance is seen at 1,660 and 1,680.
Their portfolio has reverted to riskon mode this week.
