Market Technical Reading : Supports Seen Near The 10-day SMA And 1,400… - 02/09/2010

8/8/2019 Market Technical Reading : Supports Seen Near The 10-day SMA And 1,400… - 02/09/2010

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Local Market Leads:

♦ Buoyed by improved regional sentiment on positive manufacturing data in China, as well as the sustained buying

support on the key blue chips, the local bourse extended its rally on Wednesday for a fourth day in a row.

♦ In fact, the trading sentiment was also buoyed by a strong rebound in the US futures markets. KOSPI and Nikkei

225 rallied the most by posting 1.26% and 1.17% gains for the day, after China’s Purchasing Managers’ Index

rose to 51.7 in Aug from 51.2 earlier. The latest number came above expectation of a rise to 51.5.

♦ And despite heavy profit-taking pressure on selective blue chips like Genting (-6sen) in the afternoon, the FBM

KLCI managed to stage a last-minute push to end 9.47 pts or 0.67% higher to 1,431.96.

♦ Encouragingly, the daily turnover has increased to 949m shares from Monday’s 769m shares. However, market

breadth remained negative, as counters down exceeded counters up by 476 to 307.

Technical Interpretations:

♦ After swinging to its highest level since Jan 2008 at 1,436.73 (+14.24 pts), profit-taking activities stepped in and

forced the FBM KLCI to end the day with an “evening star” candle.

♦ Technically, the candlestick pattern suggests a technical pullback today.

♦ Added with a fresh hook-down signal on the stochastic oscillators, the FBM KLCI trading sentiment is likely to be

dampened by strong profit-taking activities today.

♦ In other words, this could temporary pull down the index towards the 10-day SMA of 1,405 and the solid

psychological support level of 1,400 in the near term.

♦ Having said so, the index’s medium-term outlook will remain positive if it still sustains at above these levels.

♦ On the upside, its immediate target is set at yesterday’s high of 1,436.73, followed by 1,450.

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

Techn ica l Research

Da i l y T rad ing S t r a t egy

Market Technical ReadingSupports Seen Near The 10-day SMA And 1,400…

M a l a s i a

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A R K E T

D A T E L I N E

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RHB ResearchInstitute Sdn BhdA member of theRHB Banking GroupCompany No: 233327 -M

2 September 2010

Please read important disclosures at the en d of this report.



2 September 2010



Daily Trading Strategy:

♦ Despite the last-minute push-up from its day low of 1,425.10 (+2.61 pts), the FBM KLCI still ended the day with

an “evening star” candle to suggest a potential pullback today.

♦ This means if profit-taking activities on the key heavyweights intensify, the benchmark could ease to retest the

immediate downside support near the 10-day SMA of 1,405 and the 1,400 psychological level soon. This is

followed by a resistance-turn-support level at 1,390.

♦ However, so long as it can sustain at above these levels with robust daily turnover at between 800m – 1.0bn

shares, buying momentum can return swiftly to lead another rally, in our view.

♦ On the upside, the FBM KLCI will head towards yesterday’s high of 1,436.73 and 1,450 if the buying resumes

quickly today on the back of the overnight Wall Street and European markets’ strong rally.

Source: RHBInvest & Bloomberg

Table 2 : Major Indices & Commodities

Local Key Indices ClosingChange(Pts)

Change(% )

FBM KLCI 1,431.96 9.47 0.7

FBM 100 9,335.66 56.03 0.6FBM ACE 3,681.46 -13.09 -0.4

Major OverseasIndices

Dow Jones 10,269.47 254.75 2.5Nasdaq 2,176.84 62.81 3.0S&P 500 1,080.29 30.96 3.0FTSE 5,366.41 141.19 2.7

Hang Seng 20,623.83 87.34 0.4Jakarta Composite 3,135.32 53.44 1.7

Nikkei 225 8,927.02 102.96 1.2Seoul Composite 1,764.69 21.94 1.3

Shanghai Composite 2,622.88 -15.92 -0.6SET 919.34 6.15 0.7Straits Times 2,982.83 32.50 1.1

Taiwan Weighted 7,668.25 51.97 0.7India Sensex 18,205.87 234.75 1.3Major Commodities

NYMEX Crude Oil(US$/barrel) 73.91 1.99 2.8MDEX CPO – ThirdMonth (RM/metric ton) 2,535.00 -35.00 -1.4US Interest Rate Current Last Updated

Overnight Fed Fund Rate 0-0.25% Unch 10 Aug2010

Next FOMC meeting 21 Sep 2010

Table 1 : Daily StatisticsScoreboard 25 Aug 26 Aug 27 Aug 30 Aug 1 Sep

Gainers 186 353 286 334 307Losers 585 333 405 377 476Unchanged 268 294 285 281 270Untraded 328 385 389 372 312

Market CapTurnover(mln shares) 873 685 762 769 949Value (RMmln) 1,732 1,292 1,532 1,760 2,077

Currency

MYR vs USDollar 3.1393 3.1410 3.1420 3.1380 3.1290



2 September 2010




♦ Taking cues from the late push-up in the cash market as well as a strong rally in the early European markets, the

local futures market shrugged off the mid-day weakness by ending higher for the fourth consecutive day on

Wednesday.

♦ It was a volatile day for the FKLI overall, as it encountered strong profit-taking pressure after hitting a multi-year

high of 1,437.00 in the early trading.

♦ But with sentiment improving in the late session, the FKLI for Sep contract bounced back strongly from near its

day low of 1,425.00 to close up 9.00 pts or 0.63% to 1,435.50.

♦ On the chart, the closing with four solid positive candles as well as the upbeat short-term momentum readings

signal a further run-up in the immediate term.

♦ And on follow-through buying momentum, it is possible for the FKLI to rally towards 1,450 soon, in our view.

♦ Upon a decisive penetration to above 1,450, it will encounter fresh resistances at its all-time high of 1,536, the

highest point it reached in mid-Jan 2008.

♦ For now, the 10-day SMA of 1,404, the 1,400 psychological level and the support-turn-resistance level at 1,390

will continue to provide a strong support and underpin the current rally.

Daily Trading Strategy:

♦ Stay bullish, as the chart is still pointing to a near-term challenge to 1,450 soon.

♦ But at the same time, traders should prepare to exit if the FKLI breaches below 1,400 and 1,390 in the event of

any unexpected negative reversal.

♦ The trading range for the FKLI is expected to stay between 1,430 and 1,450 today.

Table 3: FKLI ClosingsFKLI (Month)Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest

Sep 10 1426.50 1437.00 1425.00 1435.50 9.00 1435.50 6644 17170Oct 10 1426.00 1437.00 1425.50 1436.00 -1.00 1437.00 272 0Dec 10 1428.00 1434.50 1424.00 1434.50 9.00 1434.50 219 440Mar 11 1432.00 1435.00 1424.50 1435.00 11.00 1433.50 73 158

Source: Bursa Malaysia

Chart 3: FKLI Daily Chart 4: FKLI I ntraday



2 September 2010



US Market Leads:

♦ Fuelled by an unexpected rise in the US and China manufacturing data, the US major gauges responded

positively by rallying more than 2.5% on Wednesday.

♦ Following a stronger China’s PMI data, the US factory activity also grew stronger than expected. The Institute for

Supply Management (ISM)’s gauge of manufacturing surprisingly rose to 56.3 in Aug from 55.5 in Jul, well

surpassing expectations of a drop to 52.8.

♦ Not only has this eased off investors’ worries over weakening global economic prospects, they also overlooked

other weak economic data, such as private employment data. ADP said US private sector unexpectedly cut

10,000 jobs in Aug, compared to expectations of a gain of 15,000 jobs.

♦ Thanks to the strong manufacturing data, the US light sweet crude oil futures for Oct delivery shot up US$1.99 or

2.8% to end at US$73.91/barrel.


Dow Jones Industrial Average (DJIA)

♦ In line with the expectation, the US DJIA engineered a strong technical rebound from the 10,000 psychological

level yesterday. For the day, it rallied 254.75 pts or 2.54% to 10,269.47.

♦ By overcoming the 10,150 technical hurdle decisively with a huge bullish candle, this points to a further rally

ahead.

♦ On follow-through buying momentum, it is poised to rechallenge the 21-day SMA of 10,346 soon. But only if it

can penetrate above the 21-day SMA, will it launch a more sustainable technical recovery leg.

♦ Supports are now revised higher to the 10,150 level, followed by the 10,000 psychological level.

Nasdaq Composite (Nasdaq)

♦ The Nasdaq Composite index soared 62.81 pts or 2.97% to end at 2,176.84 yesterday, confirming the earlier

“inverted hammer” candle.

♦ Aided by a further uptick in both short-term momentum readings, it is possible for the index to rechallenge the

immediate hurdle of 2,190 and the 21-day SMA of 2,204 soon.

♦ Still, it must overcome these resistances for the short-term outlook to turn positive. Otherwise, the correction

mode will continue. The immediate support stays at 2,100.

Chart 5: US Dow Jones I ndustrial Average (DJIA) Daily Chart 6: US Nasdaq Composite DailyChart 5: US Dow Jones I ndustrial Average (DJIA) Daily Chart 6: US Nasdaq Composite Daily



2 September 2010



Daily Technical Watch:

Gamuda (5398)

Bullish scenario ahead with a fresh rally underway…

♦ The share price of Gamuda halted its previous uptrend at a high of RM3.44 in Aug 2009, before falling into a

sideways trading trend and stuck within a trading range of RM3.06 to RM3.33 from mid-Aug to Nov 2009.

♦ The stock plunged to below the RM3.06 level in Nov and headed to a low of RM2.58 in Dec last year, but its

momentum recovered slowly as it survived at above the RM2.59 support level from early Jan 2010.

♦ It recovered to above the RM3.06 level in early Jun 2010, but reached the tough resistance level near RM3.33 by

late Jun.

♦ After struggling along the resistance region of RM3.33 for the past few weeks, the stock finally kicked off a

technical rally late last week. It closed at RM3.55 on Wednesday, with “three white soldiers” candle suggesting a

bullish scenario ahead with a fresh rally underway.

♦ Technically, closing with its highest level since Mar 2008, coupled with the upbeat momentum readings on the

indicators, the stock is likely to extend its buying support towards the RM3.64 resistance level in sessions to

come.

♦ In our view, with the 10-day SMA trending higher on top of the 40-day SMA, both also trading at above the

technical level of RM3.33, the medium-term positive outlook remains intact.

♦ Therefore, we expect the buying flows to continue until or unless the stock loses the support level at RM3.33.

Technical Readings:

♦ 10-day SMA: RM3.402

♦ 40-day SMA: RM3.353

♦ Support: IS = RM3.33 S1 = RM3.06 S2 = RM2.59

♦ Resistance: IR = RM3.64 R1 = RM4.10 R2 = RM4.65

Chart 7: Gamuda Daily Chart 8: Gamuda Intraday



2 September 2010



IMP ORTANT 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. Theopinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ orbe 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 beconstrued 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 personsmay 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 objectivesof persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluateparticular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment orstrategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents acceptsany liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providinginvestment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHBGroup may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equitysecurities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or otherservices from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

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 reflectinformation known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

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

upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

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 p ick-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 recommendedsecurities, 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 theactions of third parties in this respect.

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Market Technical Reading : Supports Seen Near The 10-day SMA And 1,400… - 02/09/2010