Daily technical momentum indicators have signalled initial overbought conditions for the local market, suggesting profit-taking consolidation should follow after last week's strong rally. However, the anticipated profit-taking should be shallow, with the strong average daily trading volume which jumped to a six-month high providing a good downside cushion. Revival of rotational plays should highlight lower liners as blue chips consolidate.
Following last week's breakout to a near 20-month high, immediate support for the FBM KLCI is revised to 1,287, the 23.6%FR Fibonacci Retracement (FR) of the upswing from the 1,248 pivot low of November 30 to the January 7 high of 1,299.7. Stronger retracement supports are at 1,280 and 1,274, the respective 38.2 per cent FR and 50 per cent FR levels. Expect the recent high near 1,300 and April 29 2008 pivot high of 1,305 to act as immediate hurdles capping upside pending a breakout, which could take the benchmark index up to 1,354 in coming weeks.
On blue chips, investors may look for buying opportunity on profit-taking dips in Genting Bhd, Maybank, Sime Darby and Tenaga for medium-term upside. However, look to sell rallies on MRCB, Tebrau and UEM Land given the weak follow-through buying momentum. Meanwhile, oil & gas related counters such as Kencana, SapuraCrest and Scomi Group should attract buyers on dips given the firm crude oil prices, while other lower liners such as 3A Resources, JAKS Resources, KHSB and KPS may also attract buyers for rotational play.
The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.
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