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KLCI Analysis - Further Upside In Coming Weeks

Generally, technical indicators for the KLCI have improved somewhat following last week's gain, suggesting further upside in store for the coming weeks.  What is crucially lacking is resurgent buying momentum in excess of one billion shares on a daily basis to sustain a bullish breakout from current consolidation, especially for lower liners and small caps.

The weaker lead from the tumble on Wall Street last Friday should have limited impact on the local stock market, as domestic financial institutions are unencumbered by the problems on US banking institutions.

The KLCI had staged a bullish breakout to close at a new 26-month high last Friday, which must see strong following buying interest to sustain breakout toward 1,354, the 76.4% Fibonacci Retracement (FR) of 1,525 to 801. Higher upside targets going forward are at 1,380, 1,392 and then

1,400, where stronger selling on strength interest should cap upside.Immediate support is retained at 1,329, with 1,320, the 50%FR of the 12-day rally from 1,292 low of 22 March to the 7 April peak of 1,347, acting as better support.

As for trading strategy, we would suggest investors bargain on dips blue chips such as Axiata, Genting Bhd, Genting Malaysia, IOI Corp, Maybank, Public Bank and RHB Capital to sell on rally at higher upside targets in the medium-term.  Lower liners wise, rubber glove makers remained attractive as they continue to base build for more sustainable up-trend ahead, with favorites being Adventa, Latexx and Supermax.  Construction and property related counters such as MRCB, UEM Land and Land & General are also good medium-term buys as the property market should recover further.

 

by TA Securities