Nov 21, 2011

FBM KLCI – Weekly Elliot Wave Technical Analysis

Bursa Malaysia Equity markets lose shine, downside risks emerges 

FBM KLCI – High of 1,597.08. Low of 1,310.53. Rebound stalled at 1,493.28. Support: 1,403 to 1,452  Resistance: 1,454 to 1,494

FBM KLCI Weekly Elliot Wave Chart

Strategy:  The FBM KLCI fell 14.35-points and closed at 1,454.40  last Friday. The local market remained lack luster and  blue chip shares fell on foreign liquidation activities. World markets (especially in the USA) lost ground as European markets weakened after the EUROZONE debt crisis spread to other P.I.I.G.S. nations (namely Italy). Locally, the speculative penny stock plays were dampened with HARVEST’s suspension, designation and double limit-down.

The weaker support areas for the FBM KLCI are in the 1,403 to 1,452-zone. The next resistance levels of 1,454 and 1,494 will see heavy liquidation activities. The local market had peaked on 11 July 2011 at the all-time high of 1,597.08 and a softer phase had emerged to the 1,310.53 low.

The FBM KLCI consolidated in a tight range of 801 to 936 from October 2008 to April 2009, but broke above its resistance level of 936.63 (Wave a/B) in April 2009 and surged to an all-time high of 1,597.08 on 11 July 2011. Its intermediate Wave b/B low was 836.51. We traced out a Wave c/B (of Flat 3-3-5 variety) rebound phase to its all-time high of 1,597.08 (c/B). A downward “killer” large scale  “Wave C” is now in place has only begun, with a temporary low formed at 1,310.53 (Wave a/C). A rebound move from that low is in place and has been contained above the 1,487.62 to 1,488.20 (62% retracement) levels at 1,493.28 on 31 October. (Wave b/C).

Although the tone of the global indices has improved, worries on high borrowing costs for the Italian & Spanish governments (despite ECB intervention for 5 days) could eventually put those countries into a downward “Grecian-like” spiral. As such, trade with a  relevant index and stock level stop-loss. We particularly do not like the speculative penny stock plays, as these stocks generally do not have any fundamentals at all. Also, we do note some foreign selling on shares on stocks (like CIMB and GENTING), and this might not bode well for the FBM KLCI index and MYR too.

by Maybank Investment