Malaysia Market Outlook (This Week)

Weak but bear market rally possible

With most momentum and trend indicators for KLCI continuing to flash bearish signals, investors can expect further weakness ahead. Nonetheless, a bear market rally may still emerge this week, sparked by bargain hunting ahead of the Umno party elections next week and power transition to Datuk Seri Najib Razak. Nonetheless, lack of strong buying momentum will indicate that this rally will not be sustained for long as selling on strength should cap upside potential.
On support, the last important 76.4 per cent Fibonacci Retracement (FR) of the upswing from 801 pivot low to 936 high, which is at 833 and nearby the early December pivot low of 835, must hold to prevent further downside risk towards 820. A breakdown will grease downside towards the October 28 pivot low of 801. On the flipside, immediate resistance is revised lower to 853, the 61.8 per cent FR, with next hurdle at 869, the 50 per cent FR. The 888 to 890 level will act as formidable resistance.
This column remains bearish on the financial sector, but nonetheless the severe sell-down last week in core banking stocks Maybank and Public Bank may spark technical rebound gains given their extremely oversold condition. Look for critical supports at RM3.70 and RM6.50 respectively, which are significant retracement supports, to hold off further downside risk. Lower liners such as MRCB, UEM Land and WCT may also rebound on hopes for rotational plays.
The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.