May 26 2008, 08:19 AM
KLCIs gradual downward trend likely to continue this week
MAIN BOARD
THE Kuala Lumpur Composite Index (KLCI) corrected sharply after a long awaited technical correction and finally closed the week near the tail end of its weeks trading range.
Profit taking on most of the blue-chip stocks prevented the index establishing fresh rally highs.
The KLCI traded above 1,300 points briefly in early trading and then reversed direction from its weeks high of 1,301.94 points to 1,273.44 points. It ended the week moderately lower at 1,274.78 points, down 25.89 points or 1.99% from the previous week.
Most of the main index-linked stocks returned all their earlier gains and settled Friday in the minus zone.
Sime Darby, IOI Corp, Maybank, MISC, Bumiputra-Commerce, Tenaga Nasional, Genting, Plus Expressways and PPB Group all closed with minor losses and caused the index to lose a combined 13.60 points.
Public Bank, KL Kepong and Digi.Com settled in the plus territory and added a combined 3.98 points to the KLCI.
Total volume for the four-day trading week dipped to 809.03 million shares from 865.06 million shares the week before.
Daily average volume for the week rose to 202.25 million shares from 173.0 million shares previously.
The daily candlestick chart finished the week neutral to slightly negative and suggested that the market would remain in gradual downward trend this week.
A negative long upper shadow candle occurred on Friday. This is typically a bearish signal, particularly when it is formed near a rally high or resistance level.
The KLCI established a technical double top early last week, and the failure to generate fresh upward momentum suggests that the underlying strength of the index is not solid.
Vital neckline support of the double-top formation now stands at 1,275.00-1,270.00 points. A breach of this important technical chart support this week would signal the start of a downward cycle.
Minor chart support for the coming sessions is pegged at the 1,250.00-1,245.00 points, and this level is likely to be re-visited in the event of a strong downward correction.
Chart resistance for the immediate term is adjusted lower to 1,280.00-1,290.00 points.
All the daily technical indicators finished Friday negative and suggested that the index would head south in a gradual fashion.
The daily stochastic triggered the sell signal on May 20 and stayed bearish for the immediate term. The oscillators per cent K and D settled the week sharply lower at 9.22% and 18.83% respectively.
The daily Money Flow Index (MFI) ended sharply lower at 36.04 points and showed that light distribution occurred last week.
The main trend tracker, the 3- and 7-week exponentially smoothed moving average price lines (ESA lines), ended in bearish convergence and signalled that the main trend was turning negative.
The short-term trend tracker, the 3- and 7-day ESA lines, finished in bearish divergence and indicated that the immediate-term trend was currently in a bearish phase.
The 5-day Relative Strength Index (RSI) turned south last week and closed lower at 31.07 points. Analysis of the daily RSI indicated that the indexs immediate underlying strength was weak.
URL: http://biz.thestar.com.my/news/story.asp?f...42&sec=business
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