PP 7767/09/2010(025354)

RHB Research

Malaysia
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 27 September 2010
Market Technical Reading
A Technical Rebound Likely Today...

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

Local Market Leads:

♦ Bursa Malaysia continued its sharp correction and lost another 0.5% on Friday, as investors continued to lock in
their profit on core blue chips.

♦ Also, the overnight slide in the US markets as well as a weaker ringgit dampened the market sentiment on Friday.

♦ But surprisingly, penny stocks and selective lower liners bucked the trend on heavy speculative interests.
Investors ramped up penny stocks like Kbunai (+6sen), SAAG (+2.5sen), Talam (+0.5sen) and Asiapac (+3sen).

♦ With heavyweights, Genting (-18sen), CIMB (-10sen) and Tenaga (-8sen) under tremendous selling forces, the
FBM KLCI continued to take the beating. The FBM KLCI slid 6.89 pts or 0.47% to 1,451.19 on Friday.

♦ Turnover ballooned to a higher 1.73bn shares from Thursday’s healthy level of 999m shares. Despite the fall, the
market breadth turned positive with 408 advancers against 307 decliners.

Technical Interpretations:

♦ As the bears continued to dominate the trading scene, the FBM KLCI suffered extended selling pressure for a
second day on Friday.

♦ However, the key benchmark managed to sustain at above the 1,450 crucial technical level to protect the recent
short-term uptrend momentum, though it has traded below the 10-day SMA of 1,464.

♦ In fact, the “dragonfly doji” candle recorded suggests a high possibility of a technical rebound today.

♦ Should it launch a successful rebound to above 1,450, a stronger push towards the 10-day SMA can be expected.

♦ It will refresh its bullish short-term outlook if it regains the 10-day SMA.

♦ Supports remain at the critical 1,450 level, the 40-day SMA of 1,407, the 1,400 psychological level and the 1,390
key level.

Please read important disclosures at the end of this report.

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Daily Trading Strategy:

♦ Technically, the loss of the 10-day SMA near 1,464 recently has spelt a negative reversal pattern on the index’s
near-term outlook. Should it continue to lose the next critical level of 1,450 on last Friday, the technical outlook
would have turn instantly back to bearish.

♦ But given a “dragonfly doji” candle on the chart, and the recent retracement of the “grossly overbought” short-
term momentum indicators, we believe the index is due to stage a technical rebound today.

♦ Added with a powerful 2% rally in the Wall Street on last Friday, the expected positive sentiment from the regional
markets today should be able to revive risk appetite amongst the local and foreign investors on the local bourse
today, in our view.

♦ As a result, we stay optimistic and expect buying to resume after the recent consolidation.

♦ Critically, the 1,450 level will continue to buffer the immediate-term selling pressure.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 20 Sep 21 Sep 22 Sep 23 Sep 24 Sep Local Key Indices Closing
(Pts) (%)
Gainers 316 368 398 221 408 FBM KLCI 1,451.19 -6.89 -0.5
Losers 417 345 364 523 307 FBM 100 9,504.39 -33.80 -0.4
Unchanged 269 319 280 254 289 FBM ACE 3,848.66 66.57 1.8
Untraded 359 322 311 354 342 Major Overseas
Indices
Market Cap Dow Jones 10,860.26 197.84 1.9
Turnover Nasdaq 2,381.22 54.14 2.3
(mln shares) 851 1,050 1,333 999 1,727 S&P 500 1,148.67 23.84 2.1
Value FTSE 5,598.48 51.40 0.9
(RM mln) 1,382 1,514 2,022 1,417 1,531 Hang Seng 22,119.43 71.72 0.3
Jakarta Composite 3,397.63 60.43 1.8
Currency Nikkei 225 9,471.67 -94.65 -1.0
MYR vs US Seoul Composite 1,846.60 13.97 0.8
Dollar 3.1015 3.1000 3.0900 3.0950 3.0900 Shanghai Composite 2,591.55 Closed Closed
SET 951.9 4.80 0.5
Source: RHBInvest & Bloomberg Straits Times 3,092.68 9.55 0.3
Taiwan Weighted 8,166.62 -35.92 -0.4
India Sensex 20,045.18 184.17 0.9
Major Commodities
NYMEX Crude Oil
(US$/barrel) 76.49 1.31 1.7
FCPO – Third Month
(RM/metric ton) 2,701.00 30.00 1.1
US Interest Rate Current Last Updated
21 Sep
Overnight Fed Fund Rate 0-0.25% Unch
2010
Next FOMC meeting 2-3 Nov 2010

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Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ Despite the extended selling pressure in the futures market, the FKLI managed to stage a late recovery by closing
slightly above the crucial 1,450 technical level on Friday.

♦ After breaking to below 1,450 to a low of 1,440.50 and covered the previous technical gap at 1,443 – 1,445.50,
buyers slowly returned and drove the FKLI back to the 1,450 level on mild bargain-hunting activities.

♦ By the end of the day, the FKLI for Sep contract successfully defended 1,450 and closed unchanged at 1,450.50.

♦ On the chart, it acquired a “hammer-like” candle to indicate a technical rebound today.

♦ In fact, added with the fully neutralisation of the recent grossly overbought momentum readings, the futures index
could set the stage for a meaningful rebound soon, in our opinion.

♦ And as long as the 1,450 support level remains intact, any further rebound attempt will lead it to rechallenge the
10-day SMA of 1,465.

♦ Upon the removal of the 10-day SMA, the FKLI will restore its positive short-term technical outlook.

♦ Having said that, the FKLI still needs to break through the recent high of 1,485.50 to resume its previous rally.

♦ Critical support remains at 1,450, followed by the next lower levels at the 40-day SMA of 1,407 and the 1,390
technical level.

Daily Trading Strategy:

♦ Its recent uptrend is, therefore, saved by last Friday’s successful bounce to above the key technical level of 1,450.

♦ And based on latest readings, it is poised to retake the 10-day SMA near 1,465 and to resume its rally, if it
continues to remove the recent high of 1,485.50.

♦ The trading range for the futures index is from 1,449 to 1,469 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Sep 10 1453.00 1457.00 1440.50 1450.50 Unch 1450.50 8585 20906
Oct 10 1454.50 1457.50 1441.00 1451.50 0.50 1451.50 2515 1204
Dec 10 1451.50 1456.50 1441.50 1449.50 -1.50 1449.50 164 363
Mar 11 1443.00 1455.00 1442.00 1450.00 -1.00 1450.00 30 140

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:

♦ The bulls made a strong comeback on Friday, lifting the US major gauges higher, after taking cue from the
better-than-expected durable goods orders data.

♦ It was reported that the durable goods orders fell 1.3% in Aug, but the number was slightly better than the
expected 1.4% decline. But more importantly, non-defense capital goods orders, which were viewed as a proxy
for business spending, surged more than 4% in Aug. That doubled the market consensus earlier.

♦ Aided with some good earnings news from Nike (+2.5%) and KBHome (+3.4%), investors snapped up stocks
across the board.

♦ On the NYMEX, the US light sweet crude oil futures for Nov delivery moved higher for a second day by surging
US$1.31 or 1.7% to US$76.49/barrel.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ Surprisingly, the US DJIA halted the recent slide by staging a powerful rally on Friday, with a rally of 197.84 pts
or 1.86% to 10,860.26.

♦ On the chart, by piercing beyond the tough technical barrier of 10,850 with a huge bullish candle, this spells a
likely end of the recent consolidation phase and a potential bullish breakout rally ahead to the next resistance
target at 11,250 soon.

♦ In our view, if it can record another positive confirmation candle at above 10,850 today, it will confirm a fresh
breakout from the more than 4-month old rangebound trading between the major range from 10,150 to 10,850.

♦ On the downside, the 21-day SMA of 10,449 will act as firm support going forward.

Nasdaq Composite (Nasdaq)

♦ In line with the previous “inverted hammer” candle, the Nasdaq Composite index soared 54.14 pts or 2.33% to
settle at 2,381.22 with a bullish candle on Friday.

♦ Chart wise, as it decisively reclaimed the important technical level of 2,330, it is likely to resume its rally towards
the next chart resistance level at 2,470 soon.

♦ Now, the resistance-turn-support level of 2,330 will protect its downside.

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Daily Technical Watch:

Chart 7: KNM Daily Chart 8: KNM Intraday

KNM Group (7164)

Its medium-term outlook will turn bullish only if it removes RM0.50-0.54 resistance zone…

♦ The share price of KNM broke off from the RM0.69 – RM0.85 trading range in Apr 2010, when it plunged with a
4sen bearish technical gap at RM0.685 and turned the medium-term technical outlook to bearish.

♦ The stock stabilised later when it hovered at around the RM0.50 – RM0.54 region in May to Aug 2010, but fell into
a more bearish scenario when it lost RM0.50.

♦ Its share price plummeted to a nearly one-and-a-half year low of RM0.39 in early Sep 2010, just above a critical
support level at RM0.385, before attempting to stage a technical rebound.

♦ Subsequently, in mid-Sep, the stock removed the 10-day SMA and kicked off a powerful technical rebound to end
last Friday at RM0.475.

♦ Armed with five positive candles in the last six sessions, and a constant uptrend on the momentum indicators, the
stock is poised to see further upside potential ahead.

♦ Should it remove the 40-day SMA near RM0.475, it will retest the critical RM0.50 support-trun-resistance level
soon.

♦ Though the short-term indicators point to more upside ahead, we expect a tough resistance near the RM0.50
level, nonetheless. The reducing trend on the daily volume of late suggests the trading momentum may reverse
in the near term.

♦ Its medium-term outlook will only turn positive if it manages to remove the heavy resistance zone of RM0.50 –
RM0.54, while immediate downside will be cap at the 10-day SMA at RM0.439.

Technical Readings:

♦ 10-day SMA: RM0.439

♦ 40-day SMA: RM0.4746

♦ Support: IS = RM0.439 S1 = RM0.385

♦ Resistance: IR = RM0.50 R1 = RM0.54 R2 = RM0.59

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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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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
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The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
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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.

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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