Bursa Advances Out Of Red Territory On Bargain Hunting
The FBM KLCI (+0.4%) snapped a 4-day losing streak as bargain hunting activities emerged within two-thirds of the key index components yesterday. The lower liners also advanced, while the energy sector (+1.8%) outperformed following the strength in crude oil prices.
At 9.08am, the FBM KLCI opened at 1383.06.
RHB Retail Research said today (July 11) the FKLI’s movement rebounded 8 pts from its immediate support yesterday to settle at 1,384.50 pts, which signals strong buying pressure above the 1,372-pt support. The index
opened neutral at 1,376.50 pts and bounced off strongly until it reached the day’s high of 1,389.50 pts – its movement then moderately retraced at the close. Yesterday’s bullish price action has ended the previous 4-session profit-taking streak.
For the immediate term, we expect the positive rebound to follow through, which will see the FLKI testing the 1,400-pt resistance, ie near the 50-day SMA line. However, the 50- and 200-day SMA lines are trending lower, indicating the medium-term bearish structure. Since the index posted a strong rebound movement above the 1,372-pt critical support, the counter-trend rebound remains in effect.
Until the critical support is breached, we keep to our bullish bias. Traders should remain in the long positions initiated at 1,389 pts or the close of 16 Jun. To minimise the trading risks, the initial stop-loss threshold is fixed at 1,372 pts. The immediate support is at the aforementioned 1,372 pts – 8 Jun’s close – and followed by 1,360 pts.
Conversely, the immediate resistance is pegged at 1,400 pts and followed by 1,410.50 pts, ie the high of 29 May.
Malacca Secuities said the FBM KLCI delivered a strong performance yesterday on a broad-based rebound, whilst the economy continues to demonstrate resilience after the unemployment rate in May 2023 was held steady at 3.5%. We expect an extended recovery to take place over the near term as investors are likely to bargain hunt on beaten down and oversold stocks.
The calmer market condition also presents opportunity for rotational play amongst the lower liners, though we caution that the pace of the recovery may be limited.
Elsewhere, investors may keep a close watch on the US inflation rate that will be released tomorrow night and may provide further clues over the direction of interest rate in the US.
Commodities wise, the Brent crude oil eased below USD78, while the CPO price towards near RM4,000.
Sector focus: Commodity-related sectors (energy and plantation) may take cue from the firmer prices. The stronger natural rubber production rose 6.8% MoM, whilst inventory level fell 11.4% MoM in May 2023; implying demand is gathering pace bodes well for rubber-related stocks. The technology sector is likely to march higher in tandem with the positive developments on Nasdaq overnight.
Maybank Investment Bank said the FBMKLCI Index opened the week on a higher note following rising interest in commodity related stocks despite a mixed performance across regional equities markets.
At day’s end, the benchmark index gained 5.39pts, or 0.39%,to 1,383.06pts, led by advancers DIALOG, PMETAL, KLK and CDB.
Market breadth, was positive with gainers outnumbering losers by 405 to 377. A total of 2.24b shares valued at MYR1.51b changed hands.
A rally in the Brent crude oil price and other commodities fueled interest in the energy and plantation sectors while the benchmark index key support remains intact.
Technically, Maybank IB expects the FBMKLCI Index to range between 1,375pts and 1,405pts today, with supports remaining at 1,370pts and 1,350pts.
CGSCIMB said today that the local benchmark FBMKLCI (KLCI) rebounded 5.39pts or 0.39% to end the day at 1,383.06.
Sectors wise, energy (+1.80%) emerged as the top gainer, followed by property (+0.91%) and industrial products (+0.40%). On the flip note, transportation (-0.55%), REIT (-0.18%) and utilities (-0.13%) were the top decliners.
Trading volume rose to 2.24bn (up from 1.97bn on Friday) while trading value improved to RM1.51bn (up from RM1.41bn previously).
Market breadth turned positive as 405 advancers marginally beat 377 losers. The benchmark formed a bullish engulfing pattern yesterday and kept prices fluctuating within the triangle pattern (dotted line).
CGSCIMB expects a tad more upside today as the index continues on its brief counter-trend rebound. Minor resistance seen at the 1,388 levels (or the 20-day EMA) like we mentioned previously.
The upside is likely capped by the cluster of resistances which consists of the 1,400 psychological level, the falling 50-day EMA and the falling resistance trend line.
A firm break and close below 1,376 would likely put the index on course for 1,355-1,360 next. It is free-fall territory below the 1,355 levels. Our portfolio stays in risk-off mode this week.