Further Downward Turbulence Expected
- FBM KLCI – Test of 1,737, 1,718 and 1,712 soon
- DJIA – Below the 14,844 support level. SELL!
- GCB – Imminent test of the key support areas
FBM KLCI Weekly Chart (click to enlarge):
Support: 1,712 to 1,737 Resistance: 1,755 to 1,826
Strategy: The FBM KLCI fell 6.34 points WoW on further selling to close at 1,755.85 last Friday. Persistent global and regional turbulence as well as the unwinding of the regional carry-trade sparked the selling. Volume ranged from 1.43b to 2.11b shares traded. The weaker support areas for the FBM KLCI are in the 1,712 to 1,737 zone. The key resistance levels of 1,755 and 1,826 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, and 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 1,826.22 (on 6 May 2013) has obvious bearish divergence signals despite the index’s rise to all-time highs on a gap-up move after GE13. The FBM KLCI is in overbought and bearish divergent territory and the EW count suggests a stalled uptrend at 1,826.22. With the Bearish Weekly Engulfing pattern that emerged two weeks ago, this could cause investors to continue to adopt a short-term trading strategy. Rampant foreign selling on potentially weaker and volatile world and regional markets would cause the large local institutional funds to buy lower, as foreigners dispose of their positions.
Some BUY stocks are: AFG, BAHVEST, FAVCO, GDEX, HLCAP, ILB, INARI, JCY, KARYON, KPJ, MYEG, NESTLE, NHFATT, SALCON, SAPIND, SEB, SUMATEC and YSPSAH. Some SELL stocks are: BAT, BKAWAN, CBIP, COASTAL, DLADY, GCB, HLFG, HSPLANT, KLK, KULIM, MAEMODE, MPHB, POS, QL, TAANN, TAKAFUL andTDM.
by Maybank IB