PP 7767/09/2010(025354)

RHB Research
Malaysia Technical Research Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

Da ily T rad ing S trat egy

16 July 2010
MARKET DATELINE

Market Technical Reading

Good Support Seen At The 10-day SMA...

Chart 1: FBM KLCI Daily Chart 2: FBM KLCI Intraday

Local Market Leads:

♦ The FBM KLCI snapped the recent winning streak, ended lower on profit-taking pressure yesterday, after China
economy showed signs of slowing down and the Federal Reserve cut its forecast for the US GDP growth this year.

♦ China’s GDP expanded 10.3% yoy in the second quarter, from the first quarter's 11.9%. The growth also missed
the market expectation of a 10.5% rise. Meanwhile, confidence was further undermined by the Fed’s downgrade
on the US economic outlook.

♦ The negative sentiment outweighed the recent rallies in the US major markets. Shanghai Composite suffered a
loss of 1.87%, while Hang Seng eased by 1.48%.

♦ Still, with a mild recovery in the early European markets, the FBM KLCI narrowed its losses to 7.00 pts or 0.52%
to 1,334.08, from a loss of 9.88 pts earlier.

♦ Turnover, however, fell to 620m shares from 802m shares earlier. Market breadth also turned negative for the first
time in six trading days with 390 counters down outpacing 242 counters up.

Technical Interpretations:

♦ After enjoying its seventh straight day of gains, the FBM KLCI bowed to profit-taking pressure and formed a
negative candle on the chart.

♦ Not only that, both short-term momentum readings have also tweaked lower with the stochastic oscillators issuing
a fresh “sell” signal in the “overbought” region.

♦ If profit-taking activities intensify, the index could take a longer pause, in our view.

♦ Possible support to buffer any downside pressure is seen near the 10-day and 40-day SMAs at 1,320 and 1,304.

♦ To resume the upward momentum and refresh the chance to remove 1,350, the FBM KLCI must retake
Wednesday’s high of 1,341.96 soon.
Please read important disclosures at the end of this report.

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Daily Trading Strategy:

♦ The FBM KLCI finally surrendered to the profit-taking activities yesterday, and recorded its first negative candle for
the past eight trading days to suggest a technical retracement ahead.

♦ While we see an immediate pullback risk ahead, the benchmark is expected to find a good support near the 10-
day SMA of 1,320 in the near term.

♦ As such, any pullback nearer to the SMA will reattract fresh buying interest, in our view.

♦ However, if the daily trading volume remains low, there could be some selling pressure from the shrinkage in
volume after the 802m shares traded on Wednesday.

♦ Also, the knee-jerk reaction from a fuel price hike, as announced by the government yesterday, could dampen the
market sentiment in the short term.

♦ Going forward, the index must still retake the 1,350 important resistance before it can turn more bullish on the
medium-term outlook, in our view.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 09 Jul 12 Jul 13 Jul 14 Jul 15 Jul Local Key Indices Closing
(Pts) (%)
Gainers 405 371 363 506 242 FBM KLCI 1,334.08 -7.00 -0.5
Losers 238 265 284 194 390 FBM 100 8,789.12 -34.75 -0.4
Unchanged 276 277 289 269 289 FBM ACE 3,766.32 -19.12 -0.5
Untraded 444 451 428 395 443 Major Overseas
Indices
Market Cap Dow Jones 10,359.31 -7.41 -0.1
Turnover Nasdaq 2,249.08 -0.76 0.0
(mln shares) 664 611 574 802 620 S&P 500 1,096.48 1.31 0.1
Value (RM FTSE 5,211.29 -42.23 -0.8
mln) 1,440 991 1,085 1,538 1,128 Hang Seng 20,255.62 -305.19 -1.5
Jakarta Composite 2,980.60 -0.46 0.0
Currency Nikkei 225 9,685.53 -109.71 -1.1
MYR vs US Seoul Composite 1,751.29 -6.72 -0.4
Dollar 3.1970 3.2030 3.2055 3.1955 3.1975 Shanghai Composite 2,424.30 -46.14 -1.9
SET 821.02 1.48 0.2
Source: RHBInvest & Bloomberg FT Straits Times 2,943.55 -9.26 -0.3
Taiwan Weighted 7,704.52 -9.99 -0.1
India Sensex 17,909.46 -28.70 -0.2
Major Commodities
NYMEX Crude Oil
(US$/barrel) 76.62 -0.42 -0.5
MDEX CPO – Third
Month (RM/metric ton) 2,439.00 58.00 2.4
US Interest Rate Current Last Updated
22-23 Jun
Overnight Fed Fund Rate 0-0.25% Unch
2010
Next FOMC meeting 10 Aug 2010

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Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ As regional sentiment turned cautious following fresh concerns over China and US’ economic prospects, the FKLI
suffered a mild setback on renewed profit-taking momentum on Thursday.

♦ The futures index stayed in the negative territory throughout the day, though it tried to stage a late rebound on
mild bargain-hunting support.

♦ For the day, the FKLI for Jul contract dropped 6.50 pts or 0.48% to 1,337.00, with a daily range of 1,333 - 1,343.

♦ In fact, the futures index recorded a negative candle yesterday. This was in line with the “evening star” candlestick
pattern registered earlier.

♦ With the latest negative candle and a fresh “sell” signal on the stochastic oscillators, more downswing towards the
10-day SMA near 1,321 is expected in the immediate term.

♦ Still, we expect the 10-day SMA to cap its immediate-term downside risk.

♦ Beyond that, the 40-day SMA near 1,304 and the key psychological level at 1,300 will buffer additional falls, if the
10-day SMA fails to check the sellers.

♦ Technically, the outlook for the FKLI will remain positive bias as long as it can sustain at above the 1,300 level and
the 10-day and 40-day SMAs.

Daily Trading Strategy:

♦ Yesterday’s negative candle suggests follow-through pullback ahead.

♦ The ultra short-term traders should take profit on their previous bets, but the medium-term traders should hold on
to their “long” calls until a base is formed near the 10-day and 40-day SMAs.

♦ In our view, the futures index could range between 1,330 and 1,345 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Jul 10 1343.00 1343.00 1333.00 1337.00 -6.50 1337.00 6928 17781
Aug 10 1344.50 1344.50 1333.00 1337.00 -6.50 1337.00 336 775
Sep 10 1341.00 1341.00 1331.00 1336.00 -6.50 1336.00 347 525
Dec 10 1338.00 1338.50 1332.50 1335.00 -7.00 1335.50 84 263

Source: Bursa Malaysia

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Chart 5: US Dow Jones Industrial Average (DJIA) Daily Chart 6: US Nasdaq Composite Daily

US Market Leads:

♦ Led by a late sharp advance in Goldman Sachs and BP, the US markets successfully recouped most of its early
steep declines to end nearly unchanged on Thursday.

♦ Earlier, selling pressure increased after the latest data showed manufacturing activities in New York and
Philadelphia declined in Jul and also news of the passage of financial-overhaul bill by the US Senate spooked
investors.

♦ This effectively offset the stronger-than-expected earnings from JP Morgan & Chase.

♦ Nevertheless, the markets made a late rebound after Goldman Sachs (+4.4%) and BP (+7.6%) staged a strong
rally. BP shot up after news that oil has stopped leaking into the Gulf of Mexico. Meanwhile, Goldman Sachs
rallied on speculation of a lawsuit settlement with the SEC. Later, it announced a settlement worth US$550m.

♦ On the NYMEX, the US light sweet crude oil futures for August delivery fell 42cents or 0.5% to US$76.62/barrel.

♦ After the close, Google reported quarterly profits that missed expectations. The share price fell 4.7%.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ After falling more than 120 pts at one stage, the US DJIA trimmed down its losses to only 7.41 pts or 0.07% to
10,359.31 on late bargain-hunting support.

♦ It settled with a “long legged doji-like” candle, indicating volatile sessions ahead.

♦ However, as we stressed earlier, any downside will be well-contained by the solid supports at the 10,150 level
near the 21-day SMA.

♦ On the upside, a removal of the recent high of 10,407.82 is needed to resume its upward momentum towards
June’s high of 10,594.16.

Nasdaq Composite (Nasdaq)

♦ The Nasdaq Composite index ended nearly flat with a 0.76 pt or 0.03% decline to 2,249.08 on Thursday.

♦ Following the closing with a “long legged doji-like” candle yesterday, we see more volatile trading ahead, with
strong supports near the 2,190 support and the 21-day SMA of 2,208.

♦ Meanwhile, its upside target remains at 2,330.

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Daily Technical Watch:

Chart 7: Kencana Daily Chart 8: Kencana Intraday

Kencana Petroleum (5122)

Near-term outlook has improved significantly…

♦ Kencana encountered a steep correction after touching a high of RM1.81 in Jan 2010, and plunged to below the
RM1.50 support level.

♦ Although it managed to stage a technical rebound to above RM1.50 in the later month, it has failed to sustain its
gain.

♦ As a result, the stock again lost the level of RM1.50 in May 2010.

♦ The stock touched a low of RM1.26 in late May, but began to stage another recovery leg thereafter.

♦ Following a mild congestion near RM1.50, the stock removed the resistance on Wednesday with a powerful bullish
candle, indicating a likely positive chart breakout underway.

♦ But, profit-taking activities step in yesterday, prompting it to register a “negative” candle on the chart.

♦ Technically, coupled with the down-tick on the momentum indicators, the stock could encounter further slides
today to retest the strength of the RM1.50 resistance-turn-support level.

♦ Given the recent uptick on the 10-day SMA, the near-term outlook of the stock has improved significantly, in our
view.

♦ As such, so long as it can sustain at above the RM1.50 level and the 10-day SMA, any dip will likely be mild and
swift. Upon resumption of buying momentum, it could rebound towards the RM1.60 congestion and the RM1.72
resistance level.

Technical Readings:

♦ 10-day SMA: RM1.478

♦ 40-day SMA: RM1.428

♦ Support: IS = RM1.50 S1 = RM1.23 S2 = RM1.05

♦ Resistance: IR = RM1.72 R1 = RM1.90

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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
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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
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“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
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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.

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actions of third parties in this respect.

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