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Range Bound Ahead of CNY Break

Sell IOI Corp & MMHE

The local market staged technical rebound on Thursday after blue chips slipped to a near three-month low in early trading, but follow-through buying momentum was weak with most investors sidelined ahead of the long CNY break next week. The KLCI rose 5.43 points to close at 1,619.57, off an early low of 1,597 and high of 1,621.06, as gainers edged losers 295 to 293 on dwindling trade totaling 848.3mn shares worth RM1.67bn.

Upside Capped at 1,633, Crucial Support at 1,592
Stocks should stick to narrow range bound trade today, with most market participants likely sidelined ahead of the long Chinese New Year break next week. While yesterday’s rebound to close above 1,613, the 50%FR, is positive, upside should be capped at 1,633, the 38.2%FR, followed by the 50 and 100-day moving averages at 1,649 and 1,647 respectively. The index need to prevent a breakdown below 1,592, the 61.8%FR matching the late Nov 2012 trough, otherwise next key retracement support at 1,567, the 76.4%FR, is at risk of being challenged.

SELL IOI Corp & MMHE
Due to bearish momentum, a close below RM4.74 (61.8%FR) on IOI Corp should aggravate correction towards RM4.54 (50%FR) or RM4.32 (38.2%FR) before buyers return to nibble. Resistance upon a rebound will be at RM5.01 (76.4%FR), reinforced by the mid-Bollinger band. MMHE’s breakdown below RM4.22 (Nov 2012 low)  increases downside risk towards RM3.88 (123.6%FP), RM3.67 (138.2%FP) and RM3.50 (150%FP) going forward, while upside is seen capped by the 30-day moving average (RM4.35).

 

by TA Securites