KL mart likely to pull back further (BT)

For this week, investors should exit expensive blue chips like Sime Darby, IOI Corp, Petronas Dagangan and Genting Malaysia, and continue to accumulate undervalued big-cap plays like MAS, MISC, Petronas Gas, says a head of research

Last week's significant profit-taking correction on the FBM KLCI indicate blue chips should undergo a healthy consolidation with a further downward bias this week, while trading interest should rotate to lower liners and small cap stocks as retail players return to trade more forcefully after a long absence.

Stocks in the infrastructure, construction and property sectors are likely to outperform as they will benefit from the various proposals included under "Greater KL" National Key Economic Area (NKEA) that forms part of the government's 10-year Economic Transformation Progamme.

As for the FBM KLCI, immediate support this week is envisioned at 1,424, considering the 23.6 per cent Fibonacci Retracement of the late May low of 1,243 and the recent peak of 1,479, with the subsequently stronger supports at 1,410 and then at 1,389, that mirror the 38.2 per cent Fibonacci Retracement .

The 50 per cent retracement at 1,361 should act as a formidable support floor.

On the upside, immediate resistance is of course at 1,479, with stronger hurdles seen at 1,490, which represent the January 8, 2008 peak, while the psychological 1,500 level and all-time high of 1,524 of January 14, 2008 will act as heavier resistance areas.

The subject above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.