The FBM KLCI is still trending higher over the longer term although the current correction has yet to end. The ‘Hammer’ candle on Friday suggests that investors can bottom fish but any buying can only be confirmed once the index closes above the Friday gap of 1540. The index’s longer term trend is still up but it is relatively weaker than a week ago as it is trading below 20-week MAV, although this average is still sloping up. The index has been continuing to make lower closes on a weekly basis for four weeks running and on a longer term basis, strength may only return should it close above 1560 this Friday. Nonetheless, the longer term trend will not turn down unless the index closes below 1480.
The index is still trending lower in the shorter term although last Friday’s ‘hammer’ suggests some bottom fishing activities. It has been making lower highs but which were punctuated by two gap downs last Wednesday and Friday. The uncovered gaps reflect the weak market sentiment, and have to be covered this week if Friday’s buying was credible. Also, weakness was shown by the extent of the second leg of fall, which went beyond what was expected of a measured move.
However, the global markets are extremely oversold and may rebound sometime this week. The FBM KLCI may follow suit but again credible buying has to at least close above last Friday’s gap of 1540, which would also bring the index back above 200-day MAV line. At the same time, the index is not as oversold as the rest of global equities and the RSI may need to pull lower. An uncovered Friday gap signals a still-weak market and more lower closes should confirm continued selling. Supports are expected at last Friday’s low of 1510, followed by the psychological 1500 and lastly, the medium term support of 1480.
(Chart extracted from ChartNexus)
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