Persistent Selling on Blue Chips to Extend Correction

Blue chips slumped further on Tuesday, with Axiata  (-13sen), Petronas Gas (-RM1.04) and CIMB (-8sen) leading falls and dragging the benchmark FBM KLCI down to close at a fresh five-month low. The index shed 9.71 points to end at 1,598.17, off an opening high of 1,606.88 and low of 1,596.58, as losers trashed gainers 565 to 188 on higher trade totaling 1.14bn shares worth RM1.67bn.

Breakdown Below of 1,595 to Target 1,585/1,563
The persistent selling pressure on blue chip heavyweights forced the index’s slide below the crucial 200-day moving average support yesterday, signaling the uptrend to the record high of 1,679 on 29/10/12 has ended and the beginning ofa correction phase. A decisive breakdown below the September pivot low of 1,595 would aggravate losses towards 1,585 and 1,563, the respective 61.8%FR and 76.4%FR retracement support levels. Immediate resistance on an oversold rebound would be at 1,621, the 38.2%FR matching the falling 10-day moving average, with 1,639 and 1,645, the 100-day and 50-day moving averages, as stronger upside hurdles.

Buy on Weakness AirAsia & Maybank
Helped by a daily stochastics buy signal and oversold technical momentum, Airasia should rebound towards RM3.00 (23.6%FR), with the 30-day and 50-day moving averages providing added resistance. Support at RM2.80 must  hold to prevent further downside risk to RM2.64, the 23/9/11 pivot low. Maybank need to challenge RM9.31, the 18/9/12 peak, for breakout to target RM9.92 (123.6%FP) and RM10.30 (138.2%FP) in the medium-term, while key retracement support is at RM8.71 (23.6%FR).

by TA Securities

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