Sunday, July 30, 2006

KLCI likely to move in wide sideways band

LAST CLOSE (July 28): 934.72 points, up 13.55 points (1.47%) from a week ago. Week’s high: 938.85 points; Week’s low: 921.17 points.

The Kuala Lumpur Composite Index (KLCI) continued its recovery rally last week and closed at its highest levels in 10 weeks.

Minor advances in a few of the main index-linked stocks lifted the index to its highest point in its six-week technical rebound.

MISC, Public Bank, IOI Corp, Bumiputra-Commerce, Petronas Gas, Sime Darby, Genting, Plus Expressways, British American Tobacco and Astro ended the week higher and contributed a combined 10.22 points to the index.

Tenaga Nasional and Telekom ended the week unchanged. Maxis Communication settled the week with small losses.

Volume of the KLCI for the week fell to 397.30 million from 402.55 million shares a week earlier. The average daily volume for the week declined to 79.46 million from 80.51 million shares.

The candlestick chart closed the week positive. Two big white candles occurred in the past two weeks.

This positive development suggests the immediate-term momentum of the index is still constructive.

The KLCI successfully penetrated its important chart resistance at the 928–933 levels last week and painted a positive chart picture for the immediate term.

This six-week recovery rally has helped the index recover more than 50% of its 1½-month losses incurred during the bearish trend in the May–June period.

A continuation of this upward momentum and a successful upward break from its next chart ceiling at the 940–950 levels would clear the course for the index to embark on a bullish rally.

However, failure to generate fresh follow-through buying interest as the index tests this chart resistance would likely be followed by a strong downward correction and force the index to give back some of its recent excessive gains.

An immediate chart support stands around the 930–920 levels. Breaking of this support would indicate the bullish momentum has fizzled.

The weekly indicators remained mixed at Friday’s close and called for choppy sideways actions in the coming sessions.

Stochastic: The weekly stochastic ended in the bullish extended-move zone and gave a strong negative convergence signal, indicating things were a little overdone during last week’s rally. The oscillators per cent K and D closed the week higher at 81.63% and 77.16% respectively.

The weekly Money Flow Index (MFI) ended higher at 39.41 points and showed positive money flow occurred last week. The weekly MFI signalled the index was out of its oversold state.

The 3- and 7-week exponentially smoothed moving-average price lines (ESA-lines) expanded on their buy signal last week and ended Friday positive.

The 3- and 7-week ESA-lines settled higher at 927 and 923 points respectively.

The daily ESA-lines remained in positive divergence and indicated the immediate-term cycle of the index was bullish. The 3-day ESA-line finished above the 7-day ESA-line at 923 and 929 points respectively.

Relative Strength Index (RSI): The 9-week RSI (not shown in the chart) closed higher in the positive territory 55.6 points. Analysis of the weekly RSI shows the immediate underlying strength of the index is positive.

Weekly moving-average convergence/divergence (MACD): The weekly MACD (not shown in the chart) gave the buy signal last week and settled Friday on a positive note.

The weekly MACD ended above the trigger-line and settled higher at 0.20 and minus 0.14 point respectively.

Analysis of the weekly MACD shows the near-term trend would remain bullish.


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