Friday, January 25, 2013

KLCI: Immediate Resistance At 1645-1650

Bursa Recap: KLCI up 6.6 points after falling 57 points in five straight days
Yesterday, despite a better-than-expected HSBC flash PMI from China, most Asian markets ended lower on profit taking after rallying to multi-year highs amid concerns over weak earnings reports from Apple and Hyundai Motor. Sentiment was also dampened by news that North Korea might conduct a new nuclear test and additional long-range rocket launches.

Prior to a public holiday on 24 January, KLCI continued with its relief rally, gaining 6.6 points after hitting a low of 1602 (22 January). Selling pressure moderated as trading volume decreased to 1.16 billion shares worth RM1.67 billion against 22 Jan’s 1.27 billion shares worth RM2.23 billion. Market breadth also improved as gainers/losers ratio jumped to 1.4x against 0.59x on 22 Jan and 0.09x on 21 Jan.

FBM KLCI outlook: Immediate resistance at 1645-1650
Barring the dissolution of Parliament in the near term, KLCI could stage further relief rally amid its sharp correction of 5.8% from all time high 1700 (4 January) to a low of 1602 (22 January). Technically, the rebound above 200-d SMA (now at 1624), the golden cross in hourly MACD, the hammer candlestick formation and the refill of 8.6-pt gap on 23 Jan augur well for further recovery towards 1645 (61.8% FR) and 1650 (50-d SMA) levels.

Having said that, unless KLCI can penetrate and maintain its posture above the 50-d SMA support-turned-resistance, the rebound is not likely to be sustainable and the index may retrace back 200-d SMA and 1600 psychological supports again amid election jitters.

We still advocate investors to SELL INTO RALLIES as further surge will trigger profit taking and de-risk ahead of the major event risk i.e. 13th general election. We believe that 2013 could be a year of two distinct halves, with 1H likely to be volatile as the general election has to be held no later than end-Jun while 2H to be more promising and Bursa Malaysia should perform better to reach our Institutional Research’s year-end target of 1750 when risk appetite returns, but largely dictated by the election outcome.

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Source: HLIB Research

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