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PP 7767/09/2010(025354)

Malaysia

MARKET DATELINE

PP 7767/09/2010(025354) Mala y sia MARKET DATELINE Technical Research Daily Trading Strategy Market Technical Reading Risk

Technical Research

Daily Trading Strategy

Market Technical Reading

Risk Of A “Double Top” Formation Remains

Reading Risk Of A “Double Top” Formation Remains RHB Research Institute Sdn Bhd A member of

RHB Research Institute Sdn Bhd A member of the RHB Banking Group

Company No: 233327 -M

4 May 2010

Chart 1: FBM KLCI Daily

Company No: 233327 -M 4 May 2010 Chart 1: FBM KLCI Daily Chart 2: FBM KLCI

Chart 2: FBM KLCI Intraday

May 2010 Chart 1: FBM KLCI Daily Chart 2: FBM KLCI Intraday Local Market Leads: ♦

Local Market Leads:

Due to the weak closing on the US DJIA on last Friday, the local bourse, in line with the regional markets, opened lower in early Monday’s trading.

However, as soon as the selling activities eased, bargain hunters moved back in to scoop up the core index-linked stocks. That helped to lift the key FBM KLCI, pompting it to close up marginally by 0.51 pt to 1,346.89.

The regional markets on the other hand, closed lower mostly with falls of 1.0-1.4% for the day. The HSI, KOSPI and FTSTI closed 1.4%, 1.1% and 1.0% lower respectively.

Overall sentiment remained lukewarm as investors were cautious, fearing more volatility in the near term due to the unforeseen external uncertainties.

Turnover fell to 771m shares yesterday from 889m shares on last Friday, and the market breadth turned back to negative with losers outnumbering gainers by 456 to 254.

Technical Interpretations:

As expected, the FBM KLCI opened weaker and retreated to a day low of 1,340.26, before re-attracting the bargain-hunting support and ended the day almost flat.

Despite a slight improvement on the stochastic oscillators, the FBM KLCI registered a “hangman” candle on the chart, indicating a potential further weakness today.

As we reiterated earlier, a fall from the current level will confirm the “double top” formation at the high near 1,347. Note that the index still fell short of crossing this level yesterday.

Only by removing the 1,347 level will the index’s near-term outlook turn positive, with another set of fresh chart breakout. Next upside target is at 1,390.

The immediate supports are seen at the 10-day and 40-day SMAs of 1,339 and 1,326.

Please read important disclosures at the end of this report.

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Daily Trading Strategy: 4 May 2010 ♦ Although yesterday’s recovery from the early weaknesss managed

Daily Trading Strategy:

4 May 2010

Although yesterday’s recovery from the early weaknesss managed to push the FBM KLCI to close marginally positive, a “hangman” candle from the candlestick pattern suggests a potential pullback today.

As the index could not match last Friday’s high of 1,348.15, it still faces the similar risk of a possible “double top” formation, if it eases further today.

Given the daily turnover that was far below the 1.0-1.2bn shares of active-trading level, the market sentiment will remain weak in the short term.

We expect investors to continue adopting their wait-and-see strategy, pending stabilisation signs from the volatile regional markets’ sentiment.

For the support, the 10-day and 40-day SMAs of 1,339 and 1,336 will buffer the selling pressure, if any.

Table 1 : Daily Statistics

Scoreboard

27 Apr

28 Apr

29 Apr

30 Apr

3 May

Gainers

178

236

347

436

254

Losers

502

472

363

265

456

Unchanged

308

276

279

321

268

Untraded

377

385

378

347

395

Market Cap

Turnover

(mln shares)

975

831

899

889

771

Value (RM

mln)

1,195

1,118

988

1,475

1,031

Currency

MYR vs US Dollar

3.1860

3.2160

3.1960

3.1820

3.2085

Source: RHBInvest & Bloomberg

Table 2 : Major Indices & Commodities

Local Key Indices

Closing

Change

Change

(Pts)

(%)

FBM KLCI

1,346.89

0.51

0.0

FBM 100

8,842.57

-1.59

0.0

FBM ACE

4,158.79

-10.06

-0.2

Major Overseas

Indices

Dow Jones

11,151.83

143.22

1.3

Nasdaq

2,498.74

37.55

1.5

S&P 500

1,202.26

15.57

1.3

FTSE

5,553.29

Closed

Closed

Hang Seng Jakarta Composite Nikkei 225 Seoul Composite Shanghai Composite SET FT Straits Times Taiwan Weighted India Sensex Major Commodities

20,811.36

-297.23

-1.4

2,960.90

-10.35

-0.3

11,057.40

Closed

Closed

1,721.21

-20.35

-1.2

2,870.61

Closed

Clsoed

763.51

Closed

Closed

2,944.22

-30.39

-1.0

7,952.17

-52.08

-0.7

17,386.08

-172.63

-1.0

NYMEX Crude Oil (US$/barrel) MDEX CPO – Third Month (RM/metric ton) US Interest Rate

86.19

0.04

0.0

2,554.00

-4.00

-0.2

Current

Last Updated

Overnight Fed Fund Rate Next FOMC meeting

0-0.25%

Unch

27-28 Apr

2010

 

22-23 June 2010

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Chart 3: FKLI Daily Technical Interpretations: 4 May 2010 Chart 4: FKLI Intraday ♦ Despite

Chart 3: FKLI Daily

Chart 3: FKLI Daily Technical Interpretations: 4 May 2010 Chart 4: FKLI Intraday ♦ Despite the

Technical Interpretations:

4 May 2010

Chart 4: FKLI Intraday

Technical Interpretations: 4 May 2010 Chart 4: FKLI Intraday ♦ Despite the afternoon strength in the

Despite the afternoon strength in the local cash market, the futures index failed to stage a recovery on Monday.

The FKLI for May contract lost 4pts or 0.3% to 1,343.5, even though it has once recovered to a high of 1,348.0 yesterday.

On the chart, it recorded a “shooting star-like” candle following last Friday’s positive candle, indicating a potential pullback today.

Technically, the futures index is poised to revisit the 10-day SMA of 1,338 in the immediate term.

If it loses the 10-day SMA, it could trade lower towards the 40-day SMA of 1,328.

From the momentum indicators, the flattish 14-day RSI must recover soon to lift the short-term trading momentum for the FKLI to trend up.

On the upside, the futures index must also remove the previous high of 1,350.5 to secure further follow-through buying support.

Daily Trading Strategy:

As a result of the failure to rechallenge the previous high of 1,350.5, it lacks a clear signal for the traders to turn “long” currently.

In fact, traders should expect a pullback towards the 10-day SMA of 1,338 soon.

Meanwhile, we expect the FKLI to swing from 1,335 to 1,348 today.

Table 3: FKLI Closings

FKLI (Month)

Contracts

Open

High

Low

Close

Chg (Pts)

Settle

Volume

Open Interest

May 10

1344.00

1348.00

1343.00

1343.50

-4.00

1343.50

3790

18130

Jun 10

1343.00

1346.50

1342.00

1343.50

-3.00

1343.50

209

537

Sep 10

1343.00

1344.50

1341.50

1342.50

-3.50

1342.50

25

218

Dec 10

1342.50

1343.00

1342.00

1342.00

0.00

1342.00

13

0

Source: Bursa Malaysia

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Chart 5: US Dow Jones Industrial Average (DJIA) Daily Chart 5: US Dow Jones Industrial

Chart 5: US Dow Jones Industrial Average (DJIA) Daily

Chart 5: US Dow Jones Industrial Average (DJIA) Daily

Chart 5: US Dow Jones Industrial Average (DJIA) Daily US Market Leads: 4 May 2010 Chart

US Market Leads:

4 May 2010

Chart 6: US Nasdaq Composite Daily

Chart 6: US Nasdaq Composite Daily

Nasdaq Composite Daily Chart 6: US Nasdaq Composite Daily ♦ Powered by a stream of upbeat

Powered by a stream of upbeat economic data as well as news of the US$146bn financial aid approved to Greece, the US markets staged a broad-based rally on Monday.

The Institute for Supply Management’s index of manufacturing rose to 60.4 in Apr from Mar’s 59.6, exceeding expectation of an increase to 60. Meanwhile, Mar’s consumer spending posted its biggest rise in five months with a 0.6% rise.

Separately, auto makers, including Chrysler, Ford Motor and Toyota Motor reported about 25% jump in their auto sales in Apr.

Over the weekend, European countries and International Monetary Fund (IMF) agreed to provide US$146bn aid to Greece. This temporarily eased investors’ concerns over the debt crisis in the Eurozone.

On the NYMEX, the US light sweet crude oil futures for June delivery inched up US$0.04 to US$86.19/barrel.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

After the previous strong selloff, the US DJIA made a timely comeback to above the 21-day SMA of 11,058 by rallying 162.34 pts or 1.47% to 11,170.95 on Monday.

Ended with a “positive harami” candle, this implies a slowdown in the recent bearish momentum.

Not only that, the uptick in both the short-term momentum readings with a fresh “buy” signal on the stochastic oscillators points to a stronger rebound ahead.

But until the Dow can fully reclaim the 11,250 technical level and the recent peak of 11,258.01, the current choppy trend is likely to continue. The next technical hurdle is at 11,750.

Nasdaq Composite (Nasdaq)

The Nasdaq Composite Index has recaptured the 21-day SMA of 2,477 and the 2,470 level with a “positive harami” candle yesterday, as it bounced back strongly by 40.69 pts or 1.65% to 2,501.88 on Monday.

The latest technical readings suggest a possible further rebound ahead, but its upside could be capped by the recent high of 2,535.28. Next resistance is only seen at 2,630.

Immediate support stays at the 21-day SMA and the 2,470 level.

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Daily Technical Watch: Chart 7: Proton Daily Proton Holdings (5304) Chart 8: Proton Intraday Poised

Daily Technical Watch:

Chart 7: Proton Daily

Daily Technical Watch: Chart 7: Proton Daily Proton Holdings (5304) Chart 8: Proton Intraday Poised for

Proton Holdings (5304)

Chart 8: Proton Intraday

Proton Daily Proton Holdings (5304) Chart 8: Proton Intraday Poised for another chart breakout should it

Poised for another chart breakout should it surpass RM5.00 today…

The share price of Proton broke out from the RM3.00 level in Sep 2009, and kicked off a powerful rally and reached a high of RM4.60 in the same month.

The stock fell into a consolidation phase shortly after that, and lingered at around the RM3.80 - RM4.26 region between Oct 2009 and Mar 2010.

As its upward movements gained momentum, it launched another powerful breakout of the RM4.26 level, and this time around, the stock rallied steeply on strong recovery momentum after a short congestion at RM4.26.

The stock managed to cover the 22sen technical gap created back in Nov 2007 near RM5.00 in late Apr. And yesterday, it ended at RM4.99 after touching a day high of RM5.02.

Closed with a bullish candle and the upbeat short-term momentum readings, the stock is poised for another chart breakout should it surpass the RM5.00 psychological level today.

The breakout, if it happens, will lead to a further run-up on follow-through buying momentum to RM6.00 and RM7.00 respectively.

Only if it unexpectedly retreats from RM5.00, will it give way to more selling activities in the immediate term. Otherwise, its short-term outlook is positively biased, in our view.

Technical Readings:

10-day SMA:

RM4.831

40-day SMA:

RM4.662

Support:

IS = RM4.26

S1 = RM3.80

S2 = RM3.40

Resistance:

IR = RM5.00

R1 = RM6.00

R2 = RM7.00

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IMPORTANT DISCLOSURES This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors, officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

Technical recommendation framework for stocks and sectors are as follows: -

Technical Recommendation:

Trading Buy = Short-term positive opportunity spotted. It is an aggressive trading recommendation with a book to sellers’ price for short-term technical upside. Bargain Buy = Short-term positive but technical signals have yet to trigger a rally. Traders can park and queue for their desired entry level within a small range. Buy on Weakness = Short- to Medium-term positiveness anticipated, but technical readings are still negative. Traders can pick-up the stock for future rally. Sell on Strength = Short-term momentum still positive, Traders are advice to lock in profit base on current strength. Take Profit = Short-term target achieved. Traders are advice to exit before the technical readings turn bearish. Avoid = Risky situation in the short-term and high volatility expected on the share price. Traders’ best strategy is staying away until it stabilises.

Technical Time Frame:

Immediate-term = short time frame within a contra period. Short-term = moderate time frame within two to three contra periods. For tracking purposes, we refer to 10 trading days. Medium-term = medium time frame usually refers to two to three weeks period. For tracking purposes, we refer to 20 trading days.

Technical recommendations are generally short-term in nature and may differ from RHBRI’s equity fundamental view and recommendation on the same company.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the actions of third parties in this respect.

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