Profit-taking pressure likely on Bursa (ext.BT)

Save for the daily slow stochastics indicator for the FBM KLCI which is entering overbought mode and weekly MACD, most other momentum and trend indicators suggest further upside bias for the index this week, highlighted by buy signals generated on the weekly stochastics and daily MACD. With the external market environment improving temporarily given the perceived concerted effort by European governments to prevent a eurozone debt contagion, stocks should stabilise to rebuild support at current levels. Profit-taking interest post-budget may drag stocks lower, but this could provide buying on weakness opportunity for potential gains ahead.

Immediate resistance for the FBM KLCI would be at 1,420, the 38.2 per cent Fibonacci Retracement (FR) of the sell-off from the 1,597 record high of July 11 to the recent pivot low of 1,310 on September 26. A decisive breakout above this level would see 1,454, the 50 per cent FR, being challenged going forward. Immediate support upon a profit-taking pullback would be at 1,378, the 23.6 per cent FR, with better supports at last Monday's low of 1,353 and previous week's Tuesday low of 1,339. The 1,310 pivot low acts as the critical support preventing further downside risk towards 1,293, the important 38.2 per cent FR of the upswing from the 801 low in October 2008 to the 1,597 all-time high July this year.

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