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FBM KLCI Daily Analysis - The calm before the storm?

FBM KLCI:  Downside volatility may emerge
Weaker supports of 1,452 & 1,470 1,476 & 1,494 will cap the rebounds

PCHEM – Sell this stock on rallies

Market Review
The  FBM  KLCI dipped marginally  by  0.38-points to  end  at 1,476.84  yesterday.  The  FBM100  rose  by  0.69  points  but the  FBMEMAS  fell  by  0.49  points  respectively.  Market breadth had a gainer-to-loser ratio of 322 to 462 while 286 counters  were  unchanged.  Market  volume  traded  was 2.03b shares - valued at RM1.47b. 

Regional Markets 
Asian  stocks fell for  a second day  after Italian  bond yields rose amid concern Italy’s new government will struggle to trim its debt and keep Europe’s crisis from spreading.

US Markets
US markets ended much lower last night, after Fitch stated that  the  American  banking  outlook  could  worsen  from  its stable condition if the EUROZONE’s debt problems are not resolved quickly. The Dow tumbled 190.57 points or 1.58% to  11,905.59,  the  S&P500  fell  20.90  points,  or  1.66%  to 1,236.91  and  the  NASDAQ  lost  46.59  points  or  1.73%  to 2,639.61.  Brent  crude  declined  USD1.49  to  close  at USD111.08.

Daily Technical Outlook
The FBM KLCI declined by 0.38-points to close at 1,476.84 yesterday. Its resistance areas of 1,476 and 1,494 will cap market  gains,  whilst  the  weaker  support  areas  may  be located at 1,452 and 1,470. 

The FBM KLCI’s previous key swing levels were: 1,576.95 (high),  1,474.38 (low),  1,597.08  (high)  and  1,310.53 (low). A  temporary  low  was  seen  at  1,310.53  on  26  Sep  2011.
The  market’s next key swing high on 31 October may be located at 1,493.28.

Due to the US markets’ very poor tone last night, we may see another downward day for the index. We advise clients to trade with a short-term time frame locally. It is unwise to join the recent penny stock activity (e.g. HARVEST with its suspension,  designation  and  limit-down  and  SYF  with  its large  cumulative  2  days’  price  and  percentage  drop)  as these  stocks  do  not  have  any  fundamentals  and  the companies are loss making. Sell these stocks swiftly if their trends turn down violently. 

Some  stocks  we  like  are:  ARMADA,  CARLSBG, CUSCAPI,  GENTING,  PROTON,  SOP,  SUNWAY,  TDM and UEMLAND.

 

by Maybank Investment Research 17 Nov 2011