Jun 20, 2011

FBM KLCI Weekly - inches up amidst global volatility

Support: 1,536 to 1,563 Resistance: 1,564 to 1,576 

Strategy: The FBM KLCI gained 7.24-points and closed at 1,563.43 last Friday. The local market remained quite steady despite the Greek debt worries and uncertain and mixed US economic news. Local buying on some key blue chips cushioned the market’s initial weakness.

The FBM KLCI had previously consolidated in a tight range of 801 to 936 from October 2008 to April 2009, but broke above its resistance level of 936.63 on 10 April 2009 and surged to a fresh all-time high of 1,576.95 on 6 January 2011. In terms of Elliott Waves, the FBM KLCI traced a broad Wave a/B consolidation phase to the 936.63 high. Its Wave b/B low was 836.51. We have traced out a Wave c/B (of Flat 3-3-5 variety) rebound phase. Bearish divergence signals are obvious on  the FBM KLCI’s  indicators despite  the  index’s surge  to  its all-time high of 1,576.95 (c/B). 

The obvious support areas for the FBM KLCI are located in the 1,536 to 1,563-zone. The firm resistance zone of 1,564 and 1,576 will see very heavy liquidation activities. The local market had meandered in a very tight range since the beginning of 2011. We expect that the market would be in further range-bound movements for the next few weeks, as market-moving local news flow appears to have dried up. Local buying by some funds will cause the index to inch up though.

Uptrend stocks that we like are:  AEON, AVENTUR, HLBANK, HLFG, KPJ, PETGAS, SAPCRES, SAPIND and TRC. Down-trend stocks that we advocate a sell are: CBIP, HAPSENG and EKOVEST.

by Maybank IB