FBM KLCI – Test of the 1,582, 1,586 & 1,600 levels?

All “seems” well ahead of 17 June

Support: 1,526 to 1,568 Resistance: 1,570 to 1,609

Strategy:  The FBM KLCI lost 2.97 points to close at 1,570.62 last Friday. The local market rebounded  initially  despite  the  global market volatility  as  local nibbling low volume  activities led the market up. Volume shrank from 0.78b to 0.58b shares as weekend profit taking set-in.

bursa malaysia technical analysis

above: FBM KLCI Weekly chart. (click to enlarge)


The obvious support areas for the FBM KLCI are in the 1,526 to 1,568 zone. The next resistance
levels of 1,570 and 1,609 will see very heavy liquidation activities. The FBM KLCI consolidated in
a range of 801 to 936 from Oct 2008 to Apr 2009, but broke above its resistance of 936.63 (Wave
a/B) in Apr 2009 and surged to a previous all-time high of 1,597.08 on 11 Jul 2011. 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, and the extended Fifth Wave stalled at 1,609.33 of the major Flat v/C/B-leg correction from the 801.27 low. Sell on every rebound rally, as the index has peaked with ample bearish divergent signals. The Rising Wedge breakdown on 20 Apr 2012 means that the Malaysian market’s downward correction  may  be severe. In the face of the EUROZONE and US adversity, low volume Malaysian rallies should be sold off.

Regional currencies and equity markets are in danger of a “Risk-Off” global scenario (akin to last
year’s Jul-Sep period). As Malaysia prepares for GE13 and major IPO listings in the coming months, the political uncertainty would cause investors to adopt a risk-off approach. Keep more
cash and trade with caution.

The FBM KLCI index is in overbought weekly territory and the Elliott Wave count suggests much more downside volatility to come despite the last fortnight’s low-volume rebound rally. Local index support may maintain a good technical picture for the IPOs (like Gas Malaysia today). Also do watch the Greek 2nd election (on 17 June) with caution.

 

by Maybank IB

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