Market set to trend higher

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Global markets indices and commodities performances as at September 21:

Daily FBM KLCI chart as at September 21, 2018:

The market was generally bullish last week and was in line with global markets performances. Stronger ringgit and higher crude oil prices boosted have attracted foreign institutions. The FBM KLCI increased 0.4 per cent in a week to close 1,810.64 points last Friday.

The trading volume has shrunk last week as compared to the previous shorter week but trading value remained the same. This indicates more higher-capped stocks, which are normally traded by institutions, were being traded. The average daily trading volume has declined to 2.1 billion from 2.5 billion shares in the previous week. However, the average daily trading value remained at RM2.6 billion.

Foreign institutions were net buyers while local sellers, both retail and institutions, were net sellers. Net buy foreign institutions was RM515 million while net sells from local institutions and local retail were RM464 million and RM51 million.

In the FBM KLCI, gainers out-paced decliners two to one. The top three gainers were Press Metal Aluminium Holdings Bhd (5.5 per cent in a week to RM5.03), Hong Leong Bank Bhd (2.8 per cent to RM20.82) and Telekom Malaysia Bhd (2.6 per cent to RM3.21). The top three decliners were IOI Corporation Bhd (1.3 per cent to RM4.48), RHB Bank Bhd (1.3 per cent to RM5.45) and Malayan Banking Bhd (1.1 per cent to RM9.79).

Markets globally continued to be bullish. In Asia, the Japanese market took the lead with the Nikkei 225 increasing 4.6 per cent in a week. Other biggest gainers were China’s Shanghai Stock Exchange Composite Index and Hong Kong’s Hang Seng Index which rose 4.1 per cent and 3.5 per cent respectively. The US Dow Jones Industrial Average rose to a historical high while European markets ended up bullish as well.

US dollar continued to weaken against major currencies. The US dollar Index declined to 94.2 points last Friday from 94.9 points the week before. It was the lowest in two months. The Malaysian ringgit strengthened against the US dollar at RM4.13 to a US dollar as compared to RM4.14 in the previous week.

Prices of major commodities closed higher. Gold (COMEX) snapped a three-week decline and increased 0.4 per cent in a week to US$1,203.30 an ounce last Friday. Crude oil (Brent) increased 0.9 per cent to US$78.77 a barrel. Locally, crude palm oil futures fell 3.7 per cent to close at RM2,139 per metric tonne on growing concerns over the inventory levels.

The FBM KLCI is moving towards the consolidation phase resistance level at 1,820 points. The support level is at 1,780.0 points. Is the index going to break the resistance level and climb higher?

The FBM KLCI has risen above both the short and long term 30- and 200-day moving averages. This indicates a bullish trend. However, the index has been whipsawing against the moving averages in the past two weeks and this indicates uncertainty. The index is above the Ichimoku Cloud indicator and the expanding cloud indicates strong support.

Momentum indicators are starting to show that the bullish momentum is gaining some traction. Momentum indicators like the RSI and Momentum Oscillator rebounded from their middle levels. Also, the MACD indicator is starting to converge and climb towards its moving average. Further increase in the FBM KLCI would indicate a strong bullish momentum and that can happen if the index continue to climb in the next one week.

Henceforth, the FBM KLCI is likely going to test the resistance level at 1,820 points and technical indicator indicate that the index has a high chance of breaking above this level to continue its bullish trend. Furthermore, bullish markets performance could boost market sentiment. If this happens, the index is set to climb towards 1,900 points. However, further sideways consolidation is expected if the index fails to climb above the resistance level.

The above commentary is solely used for educational purposes and is the contributor’s point of view using technical al analysis. The commentary should not be construed as an investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment advisor.