KLSE KLCI : Sell on RHBCap, Tenaga Rally
The neutralization of daily momentum indicators for KLCI from their overbought positions following last week's profit-taking correction, together with an imminent weekly MACD buy signal should pave the way for further upside in the weeks ahead. Moreover, persistent strength in global markets due to more signs the global economic recovery will be sustainable given the higher-than-expected retail sales numbers last week in the US and Japan would spillover to the local stock market.
As such, the index should be able to scale higher and re-challenge the recent high of 1,347 and test 1,354, which represent the 76.4%FR of the tumble from 1,525 all-time high to the 801 low. A decisive breakout above this level will target 1,380 next, and then 1,392, which mirror the 24 July 2007 pivot high. On the downside, immediate support cushion is retained to 1,319, which represent the 50% correction of the 12-day rally from 1,292 low of 22 March to the 7 April peak of 1,347. The next stronger support platform is at 1,309, followed by the 1,300
As for stock picks, we like Genting Bhd and IOI Corp which are likely to appreciate further after recent weakness, but look to sell on rally RHB Capital and Tenaga at revised higher upside targets given their increasingly overbought technical conditions. On the lower liner space, expect rotational plays to remain robust, with stocks such as Kinsteel, MRCB, UEM Land, Dialog, Kencana, SapuraCrest, Jaks Resources, Leader Universal and Land & General likely to attract stronger investor participation.
source: TA securities