May 14, 2012

KLCI Weekly - More turbulence & volatility ahead

  FBM KLCI – Will not be spared the global turbulence.
  CPO Futures – Stalled at MYR3,628. Persistent correction phase.
  DJIA – Further downside volatility ahead.
  MISC – Persistent daily, weekly and monthly downtrends.

Below: FM KLCI Weekly chart (click to enlarge)

klci weekly analysis chart

Support: 1,540 to 1,572 Resistance: 1,584 to 1,609

Strategy:  The FBM KLCI fell 6.72 points to close at 1,584.32 last Friday. The local market fell as it was also affected by global market volatility from  the  USA and Europe. Volume shrank from 1.40b to 0.96b shares.

The weaker support areas for the FBM KLCI are in the 1,540 to 1,572 zone. The next resistance levels of 1,584 and 1,609 will see very heavy liquidation activities. The FBM KLCI consolidated in a range of 801 to 936 from Oct 2008 to Apr 2009, but broke above its resistance of 936.63 (Wave a/B) in Apr 2009 and surged to a previous all-time high of 1,597.08 on 11 Jul 2011. Its intermediate Wave b/B low was 836.51.

We have traced out a Wave C/B (of the Flat 3-3-5 variety) rebound phase. A temporary rebound extended wave (Wave V/B) took the shape of a Rising Wedge pattern. We have revised our Wave Count of a Wave iv/B correction to 1,310.53, and the extended Fifth Wave stalled at 1,609.33 of the major Flat v/C/B-leg correction from the 801.27 low. Sell on every rebound rally, as the index has peaked with ample bearish  divergent signals. The Rising Wedge breakdown on 20 Apr 2012 means that there will be an eventual Malaysian market correction. In the face of the US markets’ decline and EUROZONE adversity, the Malaysian market will also decline on a negative global backdrop – albeit to a lesser extent.

Some stocks we like are:  AEON,  AEONCR,  CARLSBG, CBIP, CRESBLD, HUPSENG, KPJ, MPHB, TM, UMLAND  and  WELLCAL.  Some stocks on which we advocate a “SELL” are: ADVENTA,  ARMADA, BSTEAD, CUSCAPI, DLADY, KLK, KNM, MHB, MISC, MPI  and NESTLE.

by Maybank IB