KLSE - Rotational Play on Construction Stocks

klse-blog-small The local market staged a  rebound in line with regional markets helped by a rosy US Federal Reserve regional survey which point to spreading economic recovery.  The FBM KLCI rose from early low of 1,289.74 to peak at high of 1,294.94 prior to closing at 1,294.71 for a 5.2-point gain for the day, as gainers beat losers 575 to 230 on stronger volume totaling 1.76bn shares worth RM2.06bn.

Resistance at 1,300/1,305, Support at 1,287
The KLCI should stay congested below the 1,300 immediate resistance, with the 29 April 2008 pivot high of 1,305 as the next significant upside hurdle. Immediate retracement support will be at 1,287, with 1,280 and 1,274 providing stronger downside cushion.  On rotational plays, rubber glove stocks should pause for profit-taking breather after  recent dizzying rallies, while trading attention switch to construction stocks with focus in Sarawak’s SCORE and the water sector.

Sell on Rally Jaks Resources, KHSB & KPS
Be ready to sell on rally MRCB to revised upside target of RM1.80 to RM2.00, as technical momentum will be extremely overbought what with the current 14-day RSI reading already in the high 80’s.  Meanwhile, yesterday’s breakout rallies on water related stocks such as Jaks Resources, KHSB and KPS are ripe for profit-taking corrections given the strong percentage gains.  As such, we revise our call to Sell on Rally towards their adjusted upside targets.


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