FBM KLCI – Forming the Right Shoulder before Neckline Test
Support: 1,590 to 1,620 Resistance: 1,622 to 1,699
Strategy: The FBM KLCI limped down 5.85 points to close at 1,622.08 last Friday. The local market fell on profit-taking activities. Volum e increased, with 0.77b to 1.37b shares traded.
The very weak support areas for the FBM KLCI are in the 1,590 to 1,620 zone. The key resistance levels of 1,622 and 1,699 will see some heavy liquidation activities. The index consolidated in a range of 801 to 936 from Oct 2008 to Apr 2009, but broke above 936.63 (Wave a/B) in Apr 2009. 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. The current extended Fifth Elliott Wave (EW) of the major Flat v/C/B-leg correction from the 801.27 low to 1,699.68 (on 4 Jan 2013) has obvious bearish divergence signals despite the index’s rise to uncharted levels.
As Malaysia prepares for GE13 over Mar-Jun 2013, political uncertainty could cause investors to adopt a risk-off approach. The FBM KLCI is in overbought and bearish divergent territory and the EW count suggests a stalled uptrend at 1,699.68. The Malaysian bourse will witness selling around its indicated resistance areas (and 38%, 50% and 62% retracement areas of 1,636.22, 1,648.34 and 1,660.46 respectively). Last fortnight’s price action failed to surpass 1,636.22 (38% retracement level). Therefore, the index will likely be capped by further selling this week.
Some BUY stocks are: HLCAP, HUPSENG, KPJ, NCB, PAVREIT, and PWROOT. Some SELL stocks are: AIRASIA, AIRPORT, BHIC, CHHB, DAYANG, DIGI, HAPSENG, IGB, IJMPLNT, JCY, JTIASA, PARKSON, PETGAS, SHANG, SUBUR, TENAGA, UNISEM and YNHPROP
by Maybank IB