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PP 7767/09/2010(025354)

RHB Research

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

Dail y Trad ing St rat eg y

MARKET DATELINE 22 September 2010
Market Technical Reading
Rotational Interests On Mid-caps And Lower Liners To Pick Up...

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

Local Market Leads:

♦ Boosted by the overnight US rally and the release of the details on Economic Transformation Programme, the local
market extended its upward momentum for a second day on Tuesday.

♦ In fact, while regional markets finished mixed in a cautious mode ahead of the US FOMC meeting outcome in late
Tuesday, buying appetite on the local market appeared resilient.

♦ Apart from the solid buying support on GenM (+41sen) and Genting (+18sen), investors also snapped up selective
lower liners including KNM (+0.5sen), BjCorp (+7sen), Kencana (+5sen) and TimeCom (+1sen).

♦ With almost all gains on the FBM KLCI coming from GenM and Genting, the FBM KLCI added another 6.30 pts or
0.43% to 1,475.99, after matching the recent high of 1,479.59 in the early session.

♦ Overall market sentiment stayed robust, reflecting more active participation by retail investors throughout the day.
There were 1.05bn shares changed hands with 368 gainers surpassing 345 losers.

Technical Interpretations:

♦ Just after matching last Friday’s 1,479.59 high (+9.90 pts), the FBM KLCI staged a mild retreat on renewed profit-
taking activities, before closing higher at day end.

♦ The benchmark regained a positive candle with the strong trading volume at above 1.0bn shares mark. This points
to a possible further upside room in the immediate term.

♦ With follow-through buying support, the index will take the market higher even with the “very overbought” 14-day
RSI reading.

♦ Its next target is to close the upper technical gap at 1,490.50 - 1,497.64, before crossing the 1,500 psychological
level towards the all-time high level of 1,524.69.

♦ On the downside, its immediate supports are seen at the rising 10-day SMA of 1,456 and the 1,450 level.

Please read important disclosures at the end of this report.

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Daily Trading Strategy:

♦ In line with our expectation, the local market made a new attempt to refresh its rally by rechallenging last Friday’s
high of 1,479.59 yesterday.

♦ Though it failed in its attempt to surpass the recent high, we are optimistic that 1,479.59 will be taken out as soon
as today amid improving market confidence and robust trading volume of late.

♦ Breaking Friday’s high will enhance our bullish short-term outlook on the FBM KLCI and lift it to cover the technical
gap at 1,490.50 - 1,497.64, before challenging the all-time high level of 1,524.69.

♦ Given the increased participation from retailers, we expect rotational interests on the mid-caps and lower liners to
pick up in sessions ahead.

♦ This uptrend will be supported by the 10-day SMA of 1,456 and the breakout point at 1,450.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 14 Sep 15 Sep 17 Sep 20 Sep 21 Sep Local Key Indices Closing
(Pts) (%)
Gainers 504 299 446 316 368 FBM KLCI 1,475.99 6.30 0.4
Losers 274 416 296 417 345 FBM 100 9,647.77 41.37 0.4
Unchanged 269 301 268 269 319 FBM ACE 3,843.19 -36.75 -0.9
Untraded 312 349 350 359 322 Major Overseas
Market Cap Dow Jones 10,761.03 7.41 0.1
Turnover Nasdaq 2,349.35 -6.48 -0.3
(mln shares) 1,040 725 968 851 1,050 S&P 500 1,139.78 -2.93 -0.3
Value FTSE 5,576.19 -26.35 -0.5
(RM mln) 2,128 1,436 1,906 1,382 1,514 Hang Seng 22,002.59 25.25 0.1
Jakarta Composite 3,365.04 -5.94 -0.2
Currency Nikkei 225 9,602.11 -23.98 -0.2
MYR vs US Seoul Composite 1,832.63 Closed Closed
Dollar 3.1045 3.1150 3.1010 3.1015 3.1000 Shanghai Composite 2,591.55 2.84 0.1
SET 937.21 14.15 1.5
Source: RHBInvest & Bloomberg Straits Times 3,095.39 14.41 0.5
Taiwan Weighted 8,196.40 9.44 0.1
India Sensex 20,001.55 95.45 0.5
Major Commodities
NYMEX Crude Oil
(US$/barrel) 73.52 -1.34 -1.8
FCPO – Third Month
(RM/metric ton) 2,679.00 -29.00 -1.1
US Interest Rate Current Last Updated
21 Sep
Overnight Fed Fund Rate 0-0.25% Unch
Next FOMC meeting 2-3 Nov 2010

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22 September 2010

Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ Compared to the cash market, the KL futures market edged up only marginally amid cautious trading sentiment
throughout the day.

♦ Traders held back their bets ahead of the interest rate decision and a possibility of more quantitative measures to
be announced by the US Federal Reserve after late Tuesday’s FOMC meeting.

♦ At the close, the FKLI for Sep contract gained only 3.00 pts or 0.20% to 1,478.50, after trapping between
1,473.50 low and 1,484.00 high.

♦ Although the FKLI failed to penetrate last Friday’s high of 1,485.50, the record of a small positive candle yesterday
suggests a continuation of the uptrend.

♦ With a firm support near the uptrending 10-day SMA of 1,458 and the key level of 1,450, the futures index is likely
to stay positive bias.

♦ An increase in trading momentum will lead to a removal of the 1,485.5 high and a follow-through rally to the
upper technical gap at 1,490 – 1,502.50 and the all-time high of 1,536, hit in Jan 2008.

♦ As such, we are keeping our bullish outlook on the FKLI.

Daily Trading Strategy:

♦ The small positive candle on the chart points to a possible increase in buying momentum today.

♦ In our view, traders should keep their “long” position for further upside ahead.

♦ We foresee a trading band of 1,473 to 1,493 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Sep 10 1476.00 1484.00 1473.50 1478.50 3.00 1478.50 4161 20327
Oct 10 1477.50 1483.50 1474.00 1479.00 3.00 1479.00 307 711
Dec 10 1479.00 1481.00 1476.50 1477.00 0.50 1477.50 31 363
Mar 11 1480.00 1480.00 1475.00 1475.00 -1.50 1476.00 9 131

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:

♦ Wall Street gave up its midday gains by ending mixed on Tuesday, after the Federal Reserve signaled that it is
ready to take additional measures to boost economic growth.

♦ Earlier, investors reacted cautiously to the stronger-than-expected rise of 10.5% in housing starts in Aug. But
pushed up stocks after the Fed said it prepared to ease further monetary policy as it was uncomfortable with the
low levels of inflation. Meanwhile, the Fed kept its key interest rate unchanged as expected.

♦ But the rally faded towards the closing with the key indexes ended in a mixed note on late profit-taking pressure.

♦ Due to high inventories concerns, sellers returned to hammer the crude oil prices. At the close, the expired US
light sweet crude oil futures for Oct delivery dropped US$1.34 or 1.8% to US$73.52/barrel.

♦ After the close, Adobe Systems slumped 15% in extended trading after its revenue outlook missed expectations.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ Weighed down by heavy profit-taking pressure, the US DJIA trimmed down its early gain to end up only 7.41 pts
or 0.07% to 10,761.03 yesterday. It shot up as much as 80 pts at one stage.

♦ And by pulling down from its intraday high of 10,833.39, it settled the day with a possible “star” candle to imply a
negative trend reversal soon.

♦ Coupled with its failure to rally above the 10,850 hurdle and a fresh “sell” signal on the stochastic oscillators, it
could suffer profit-taking dip towards the 21-day SMA of 10,354.

♦ But, a successful breakout from 10,850 will lead to a rechallenge of 11,250 higher resistance level.

Nasdaq Composite (Nasdaq)

♦ As the Nasdaq Composite index eased down by 6.48 pts or 0.28% to 2,349.35 with a “negative harami” candle
yesterday, this signals a reduction in the recent breakout momentum.

♦ In addition, the fresh “sell” signal on the stochastic oscillators also raises the odd of a technical pullback soon.

♦ However, if it can still sustain at above the 2,330 level after taking a breather soon to consolidate its recent rally,
its uptrend will resume towards the next resistance level at 2,470.

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Daily Technical Watch:

Chart 7: Kencana Daily Chart 8: Kencana Intraday

Kencana Petroleum (5122)

Revisiting the RM1.72 tough hurdle soon…

♦ The share price of Kencana reversed into a negative trend after a swift penetration to above the tough resistance
level of RM1.72 in Jan 2010.

♦ It fell sharply to below the RM1.50 support level in a short period but managed to recover to RM1.68 in Apr 2010.

♦ However, the stock’s technical picture deteriorated again in late May. This led the stock to a severe plunge to a
low of RM1.26 with a grossly oversold momentum reading on the chart.

♦ The stock only confirmed a technical rebound in Jun when its 10-day SMA recovered to above the 40-day SMA
near the important level of RM1.50.

♦ As momentum increased, the stock slowly recaptured the RM1.50 level and formed a steady base before
launching another round of increase.

♦ Given the solid support from the 10-day and 40-day SMAs, the stock reached a high of RM1.69 yesterday, before
closing the day at RM1.66 with a huge bullish candle.

♦ It suggests a follow-through buying support likely today and this means the stock is poised to revisit RM1.72

♦ Added with the upbeat short-term momentum, should it penetrate RM1.72 this round, it will likely head towards
the all-time high level near the RM1.90 resistance level next.

Technical Readings:

♦ 10-day SMA: RM1.598

♦ 40-day SMA: RM1.542

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

♦ Resistance: IR = RM1.72 R1 = RM1.90

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22 September 2010


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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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