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PP 7767/09/2011(028730)

RHB Research

Technical Research Institute Sdn Bhd
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Company No: 233327 -M

Dail y Trad ing St rat eg y

MARKET DATELINE 12 October 2010
Market Technical Reading
Further Upside Potential In The Near Term...

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

Local Market Leads:

♦ Underpinned by firm buying support on blue chips, Bursa Malaysia resumed its upward momentum by edging
higher on Monday.

♦ Blue chips, especially plantation heavyweights, Sime (+11sen) and IOICorp (+8sen) ended in a strong note, as
sentiment was bolstered by a surprise rally on crude palm oil futures.

♦ CPO for the third month contract soared RM170 or 6.16% to RM2,930/tonne, as traders responded positively to
the news that the USDA has cut its forecasts on soybean and corn harvests.

♦ Apart from that, the gains in the Wall Street on last Friday also supported the sentiment on the local bourse, as
the poor US jobs data reinforced hopes of further quantative easing measures from the US Federal Reserve.

♦ After the close, the FBM KLCI was up 6.00 pts or 0.41% to a fresh year high of 1,487.41.

♦ Overall daily turnover remained robust at 1.09bn shares, and counters up beat counters down by 479 to 287.

Technical Interpretations:

♦ After forming a tiny technical gap at 1,484.48 - 1,484.57, the FBM KLCI rose to a fresh year high of 1,490.10,
before easing off its high on mild profit-taking activities.

♦ However, closed with a potential “star” candle on the chart, the index points to uncertainty in the immediate term.

♦ Nevertheless, we expect any retreat to be short-lived, with an immediate support at yesterday’s technical gap at
1,484.48 - 1,484.57, followed by the technical gap at 1,472.32 – 1,476.05 and the 10-day SMA of 1,472.

♦ In fact, the FBM KLCI is ready to swing towards the technical gap near 1,490.5 – 1,497.64 and the psychological
level of 1,500, on the back of firm follow-through momentum, in our view.

Please read important disclosures at the end of this report.

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Daily Trading Strategy:

♦ Technically, although the FBM KLCI still registered a possible “star” candle that implies a potential pullback on
profit-taking pressure in the immediate term, we see limited downside ahead.

♦ This is because of the index’s ability to record another fresh year high of 1,490.10 yesterday, thanks to the steady
buying support on the heavyweights.

♦ In fact, with the current robust short-term momentum readings and the strong daily turnover, the index could see
further upside potential in the near term.

♦ Going forward, we opine that the market’s bullish uptrend will be driven by optimism ahead of the upcoming 2011
Budget announcement on Friday, as well as a potential rally in crude palm oil-related stocks amid the powerful
breakout rally in the CPO futures yesterday (see also Chart Surveillance (CPO) and Short-term Trading Ideas for
today - 12 Oct 2010).

♦ This, in our view, could pave ways for the FBM KLCI to cover the technical gap near 1,490.5 – 1,497.64 soon and
to retake the psychological level of 1,500, before gearing for an eventual retest of the all-time high level of

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 5 Oct 6 Oct 7 Oct 8 Oct 11 Oct Local Key Indices Closing
(Pts) (%)
Gainers 319 443 299 397 479 FBM KLCI 1,487.41 6.00 0.4
Losers 411 330 410 332 287 FBM 100 9,769.09 39.92 0.4
Unchanged 290 283 303 301 293 FBM ACE 4,078.75 58.57 1.5
Untraded 337 301 343 324 296 Major Overseas
Market Cap Dow Jones 11,010.34 3.86 0.0
Turnover Nasdaq 2,402.33 0.42 0.0
(mln shares) 986 955 842 1,075 1,094 S&P 500 1,165.32 0.17 0.0
Value FTSE 5,672.40 14.79 0.3
(RM mln) 1,505 1,657 1,523 1,657 1,715 Hang Seng 23,207.31 263.13 1.1
Jakarta Composite 3,548.75 1.80 0.1
Currency Nikkei 225 9,588.88 Closed Closed
MYR vs US Seoul Composite 1,889.91 -7.16 -0.4
Dollar 3.0963 3.0890 3.0890 3.1125 3.0995 Shanghai Composite 2,806.94 68.20 2.5
SET 977.85 14.66 1.5
Source: RHBInvest & Bloomberg Straits Times 3,163.41 10.07 0.3
Taiwan Weighted 8,176.76 -67.43 -0.8
India Sensex 20,339.89 89.63 0.4
Major Commodities
NYMEX Crude Oil
(US$/barrel) 82.23 -0.43 -0.5
FCPO – Third Month
(RM/metric ton) 2,930.00 170.00 6.2
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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12 October 2010

Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ Buoyed by expectations of further stimulus moves from the US Fed Reserve as well as a powerful rally in crude
palm oil futures, the FKLI resumed its rally by launching a strong comeback yesterday.

♦ At the close, the FKLI snapped the recent consolidation by advancing to its highest level since mid-Jan 2008 at
1,490.50. For the day, it shot up 11.00 pts or 0.74%.

♦ Closed with a positive candle, the chart strongly suggests for a resumption of bullish momentum soon.

♦ Besides, the positive readings on the short-term momentum indicators also point to further upside potential

♦ Coupled with a fresh year high yesterday, the futures index is poised to end the recent consolidation and to
resume its rally towards the technical gap at 1,490 – 1,502.5 soon, in our opinion.

♦ A further breakthrough of the technical gap will lead the FKLI to the all-time high level resistance at 1,536.

♦ On the downside, the current uptrend will be well-supported by the supportive 10-day SMA of 1,472, which is also
trending on a steady uptrend recently.

Daily Trading Strategy:

♦ Techniclaly, the FKLI has restored its bullish momentum following a succesful penetration of the recent high of

♦ Not only that, backed by follow-through buying support, it could even clear out the previous technical gap at 1,490
– 1,502 soon. Upon full coverage of the technical gap, traders can expect a test to the historical high level of
1,536 next.

♦ Meanwhile, the trading range for the FKLI is expected to be between 1,486 and 1,500 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Oct 10 1486.00 1493.00 1486.00 1490.50 11.00 1490.50 3817 21806
Nov 10 1485.50 1492.50 1485.50 1491.00 11.50 1491.00 153 112
Dec 10 1487.00 1490.50 1487.00 1490.50 10.50 1490.50 93 386
Mar 11 1487.00 1490.00 1487.00 1490.00 10.50 1490.00 12 135

Source: Bursa Malaysia

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12 October 2010

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

US Market Leads:

♦ Overnight US stocks ended nearly flat in quiet trading on Monday, as worries on the quarterly earnings from key
US corporates this week outweighed hopes from the potential further easing in the US monetary policy.

♦ Dow components, Intel, JPMorgan Chase and General Electric are scheduled to report their quarterly results this
week. This forced investors to turn cautious, after pricing in any possibility of further stimulus measures by the
Federal Reserve.

♦ On the merger & acquisition (M&A) news, children’s clothing retailer Gymboree rallied 22.4% on a US$1.8bn
buyout offer from private-equity Bain Capital. Chesapeake Energy was up 1% after China’s Cnooc said it would
acquire one-third of the former’s Eagle Ford shale project in Texas.

♦ As the US dollar staged a rebound, the US light sweet crude oil futures for Nov delivery eased 43 cents or 0.5%
to US$82.23/barrel.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ Despite facing mild profit-taking pressure, the DJIA managed to uphold the 11,000 level by inching up another
3.86 pts or 0.04% to end at 11,010.34 yesterday.

♦ Settling with a “doji” candle and the easing short-term momentum readings, this paints more uncertainties ahead.

♦ But judging from the recent bullish chart breakout from 10,850, we remain positive on the rally and expect the
index to head towards 11,250 near the Apr’s high of 11,258.01 soon, if it sustains at above 11,000.

♦ Strong supports stayed solidly at the resistance-turn-support level of 10,850 and the 21-day SMA of 10,777.

Nasdaq Composite (Nasdaq)

♦ The Nasdaq Composite index ended nearly flat at 2,402.33, inching slightly higher by 0.42 pt or 0.02% on

♦ Likewise, the Nasdaq acquired a “doji” candle to show investors’ indecision on the immediate-term direction.

♦ However, backed by the rising 21-day SMA of 2,348 and the solid 2,330 level, chances are bright that it will
resume its upswing leg towards the next resistance level at 2,470 and Apr’s high of 2,535.28 soon.

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Daily Technical Watch:

Chart 7: Kulim Daily Chart 8: Kulim Intraday

Kulim (2003)

The SMAs showed a positive medium-term sign on the chart…

♦ The share price of Kulim halted its previous uptrend in Jul 2009 from a low of RM3.39 in Oct 2008, and started to
move sideways within a range of RM7.00 to RM7.90 in the next 12 months.

♦ When it broke out from the RM7.90 level in Aug 2010, it shot up all the way to the resistance level of RM8.60 in
Sep 2010, before experiencing a slight consolidation towards the supportive 40-day SMA near RM8.20 – RM8.40.

♦ But, since early Oct, the stock regenerated a strong buying momentum and pushed sharply across the RM8.60
level and surpassed the RM9.20 resistance to an intraday high of RM9.58 on last Friday.

♦ Though it failed to hit a higher high yesterday, it managed to chalk up further gains to RM9.39 with another
positive candle on the board.

♦ Technically, the stock might see some profit-taking activities in the near term, due to the negative cross of the
“overbought” stochastic oscillators, the uptick on the 10-day SMA near the 40-day SMA recently showed a
positive medium-term sign on the chart.

♦ This suggests that any profit-taking dip in the near term, if any, is likely to be short-lived.

♦ Optimistically, should the stock sustain at above the RM9.20 level in the near term, it might be able to challenge
the higher resistance near RM9.80 and the RM10.26 historical high level on the next buying push.

Technical Readings:

♦ 10-day SMA: RM8.871

♦ 40-day SMA: RM8.524

♦ Support: IS = RM9.20 S1 = RM8.60 S2 = RM7.90

♦ Resistance: IR = RM9.80 R1 = RM10.26

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12 October 2010


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
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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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