FBM KLCI – Overbought with bearish divergence. Caution!
Support: 1,609 to 1,643 Resistance: 1,646 to 1,655
Strategy: The FBM KLCI eased 2.11 points to close at 1,646.11 last Friday. The local market fell on minor blue chip profit-taking activities on PETDAG and PPB. Volume rose from 1.21b to 1.37b shares despite the National Day holiday last Friday.
The weaker support areas for the FBM KLCI are in the 1,609 to 1,643 zone. The next resistance levels of 1,646 and 1,655 may witness some profit -taking 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. We have revised our Wave Count of a Wave iv/B correction to 1,310.53, and the extended Fifth Wave stalled initially at 1,609.33 of the major Flat v/C/B-leg correction from the 801.27 low. From the 1,526.60 low, we are tracing out an extended Wave V/V Flat pattern that may be stalling as it rises with abundant bearish divergence signals.
As Malaysia prepares for GE13 in the coming months, political uncertainty could cause investors to adopt an eventual risk-off approach. The FBM KLCI index is in overbought and bearish divergent weekly territory and the Elliott Wave count suggests a stalling uptrend near 1,655.39 (which is a great area to take profit). Also, most global indices are in lofty territory and there are still great chances of an autumn reversal.
Some trading buy stocks that we like are: AEONCR, AHEALTH, BOILERM, CMSB, DLADY, JOHOTIN, KLCCP, TM and ZHULIAN. Some stocks on which we advocate a SELL are: AFG, AIRASIA, AMMB, ANNJOO, APM, EVERGRN, FAJAR, GUANCHG, HLFG, INGRESS, JCY, JTIASA, MBSB, PETONE, PETRONM, PPB, SKPETRO, TDM, TOPGLOV, UEMLAND and YTLPOWR.
by Maybank IB