Friday, October 28, 2011

FBM KLCI Eased 3.6% on Profit Taking, 16-22 October 2011

The pullback last week was widely expected as the index had risen substantially for the last three weeks. We conclude that the market has found the immediate bottom at 1,330 points and we believe the market will continue to consolidate before staging another rebound as both the Moving Average Convergence Divergence (MACD) and signal lines are crossing over into the positive region. In other words, the buying momentum is still intact with minimum downside risk. For the week, the market fell 3.6 points or 0.25% to close at 1,438.83 points.

Equity Market Outlook
In the short term, the index should resume its uptrend towards the resistance of 1,453 – 1,473 points. The market needs positive catalysts to move above the resistance trend lines and if that happens, we might see the index crossing 1,500 points, a key psychological level. In order to capitalize on the uptrend, we see construction, banks, plantation and property as the best proxies.

On the downside, the market is well supported at 1,420 points which is the 50-day Smooth Moving Average (SMA).

Equity Market Strategy
Stock picking is still our strategy with preference for liquid fundamental stocks on weakness.

Source: ING Funds Berhad

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