Nov 29, 2011

FBM KLCi Weekly Technical Analysis Nov 2011

Global investors may SELL OFF as RISKS are OFF!
- FBM KLCI – High of 1,597.08. Low of 1,310.53. Rebound stalled at 1,493.28.
- CPO Futures – Bear market rebound stalled at RM3,270.
- DJIA – High at 12,876.00. Low of 10,404.49. Stalled rebound at 12,284.31.
- TENAGA – A weaker trend for this stock. Revisit of RM4.89 & lower.

fbm-klci-rechnical-analysis FBM KLCI Weekly Chart

Support: 1,380 to 1,424  Resistance: 1,431 to 1,493
Strategy:  The  FBM  KLCI  tumbled  22.85-points  and  closed  at  1,431.55  last  Friday.  The  local market remained lack luster and blue chip shares fell on further foreign liquidation activities. US stocks posted 7 straight sessions of losses by last Friday and ended the worst week in 2 months, as  the  lack  of  a  credible  solution  to  Europe's  debt  crisis  kept  investors  away  from  risky  assets.

Furthermore,  investors  were  concerned  too  as  S&P  downgraded  Belgium's  credit  rating  to double-A from double-A-plus. 

The weaker support areas for the FBM KLCI are in the 1,380 to 1,424-zone. The next resistance levels of 1,431 and 1,493 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 major EUROZONE governments could eventually put those countries into a downward “Grecian-like” spiral. Despite the US weekend retail sales rising to a record (this might be a temporary phenomena) and speculation that the EUROZONE leaders may do more to tame their debt crisis, one thing can be sure for this week and that is great price volatility.

by Maybank Investment Bank