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KLCI Rebound On Overnight US Rally

bursa malaysia 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