KLCI Rebound On Overnight US Rally
Mild profit taking capped gains on local stocks Wednesday, with losses spotted on selective blue chips and key index heavyweights, while most regional markets were subdued ahead of the US Federal Reserve’s decision on stimulus tapering. The FBM KLCI inched down by 3.4 points to 1,847.50, off a low of 1,841.43 and high of 1,849.43, as losers beat gainers 433 to 326 on trade totaling 1.08bn shares worth RM1.63bn.
Immediate Resistance at 1,860
The local market should rebound on spillover from the strong overnight rally on Wall Street after the US Federal Reserve’s decision to start unwinding stimulus and dovish forward guidance. While the unexpected tapering could causesome knee jerk selling reaction in the local market on fears of reversal of foreign funds, we expect it to be short lived as the measured pace of reduction of US$10bn per month, the Fed’s commitment to maintain interest rates at current level until 2015 and the strength in the US economy would entice local funds to provide buying support ahead of year-end window dressing activities. So, any sharp corrections in undervalued blue chips like Maybank (TP: RM11.50), Axiata (TP: RM8.43), FGV (TP: RM5.29), Telekom (TP: RM6.18), Air Asia (TP: RM2.97) and etc. could provide a buying opportunity.
Nonetheless, immediate KLCI resistance remains at 1,860, coming from the 123.6% Fibonacci Projection of the rally from 1,660 low ofAugust to the October high of 1,822, and the subsequent hurdle would be at 1,884, the 138.2%FP. Immediate support is seen at the 10-day moving average at 1,833, followed by the 30-day moving average at 1,811, and next 1,805, which is the current 50-day moving average. The 100-day moving average at 1,783 will provide a strong support buffer.
Buy on Weakness Wah Seong & WCT Holdings
Wah Seong should extend consolidation pending breakout above the upper Bollinger band (RM1.70) to target resistance at 50%FR (RM1.86), while a confirmed breakout would low of 07/02/13 (RM1.56). On the other hand, further fall on WCT Holdings toward the 23.6%FR (RM2.09), would be a good buying opportunity for rebound towards 38.2%FR band (RM2.40), going forward. Crucial support cushioning downside is seen at the low of 12/06/12 (RM2.00).
by TA Securities