62% Retracement Level Still Capping The FBMKLCI
FBM KLCI – Capped at 1,660.46 initially. Forming the “Right Shoulder”
Support: 1,590 to 1,653 Resistance: 1,660 to 1,699
Strategy: The FBM KLCI rebounded 16.52 points on a WoW basis to close at 1,653.96 last Friday. The market rose on low-volume nibbling activities. Volume ranged from 0.77b to 1.13b shares traded.
The obvious support areas for the FBM KLCI are in the 1,590 to 1,653 zone. The key resistance levels of 1,660 and 1,699 will see some heavy liquidation activities. The index consolidated in a range of 801 to 936 from Oct 2008 to Apr 2009, but broke above 936.63 (Wave a/B) in Apr 2009. Its intermediate Wave b/B low was 836.51. We have traced out a Wave C/B (of the Flat 3 -3-5 variety) rebound phase. We have revised our Wave Count of a Wave iv/B correction to 1,310.53. The current extended Fifth Elliott Wave (EW) of the major Flat v/C/B-leg correction from the 801.27 low to 1,699.68 (on 4 Jan 2013) has obvious bearish divergence signals despite the index’s rise to uncharted levels.
As Malaysia prepares for GE13 over Mar-Jun 2013, political uncertainty could cause investors to adopt a risk-off approach. The FBM KLCI is in overbought and bearish divergent territory and the EW count suggests a stalled uptrend at 1,699.68. The Malaysian bourse will witness selling around its indicated resistance areas (62% retracement area of 1,660.46). Price action over the
last month may still form the right part of the Head and Shoulder Top pattern. As such, selling at
the 1,660.46 level could cap the market’s rise initially. Some BUY stocks are: AIRASIA, AIRPORT, ALLIANZ, AXREIT, BAT, BOLTON, CAB, FREIGHT, GAB, GENTING, GLOMAC, HUPSENG, KPJ, KSENG, KSL, LMCEMENT, MAHSING, MBM, MBSB, MNRB, NESTLE, OLDTOWN, ORIENT, PESTECH, PUNCAK, RHBCAP, SUNWAY, TAKAFUL, TASEK, UEMLAND and UMCCA. Some SELL stocks are: APM, BONIA, IOICORP and TIMECOM.
by Maybank IB