Market Technical Reading : Bargain Hunters Should Reemerge Near The 10-day SMA...-09/04/2010

PP 7767/09/2010(025354) MARKET DATELINE

Malaysia

RHB Research Institute Sdn Bhd A member of the RHB Banking Group

Technical Research

Company No: 233327 -M

Da ily T rad ing S trat egy

9 April 2010

Market Technical Reading Bargain Hunters Should Reemerge Near The 10-day SMA...

Chart 1: KLCI Daily

Chart 2: KLCI Intraday

Local Market Leads:

♦

Shakened by the strong selloff in the Asian markets amid the overnight US losses and an unexpected drop in Japan’s machinery orders, the FBM KLCI finally bowed to profit-taking activities on Thursday.

♦

The local benchmark index concluded its longest winning streak since 1994, ended at 1,332.93, down by 12.16 pts or 0.90%. Leading the downfall were heavyweights CIMB (-44sen), MISC (-23sen) and Maxis (-7sen).

♦

On the regional front, SET (-3.53%), Jakarta Composite (-1.65%) and Nikkei 225 (-1.10%) also fell after the US DJIA dropped 72-pts and that Japan’s machinery orders suprisngly shed 5.4% in Feb from Jan, stoking worries that the economic recovery might not be as smooth as expected.

♦

Apart from that, sentiment was also hurt by the renewed concerns over a possible debt default by Greece.

♦

However, thanks to the strong rotational interests on selective lower liners, like Scomi (+9.5sen) and L&G (+1.5sen), turnover expanded to 1.28bn shares from 1.13bn shares earlier. But, market breadth turned negative for the first time in six trading days with decliners overwhelming advancers by a ratio of 2 to 1.

Technical Interpretations:

♦

The FBM KLCI was under heavy profit-taking pressure throughout the day, and closed near the day’s low.

♦

With a huge bearish candle on the chart, the index could see follow-through profit-taking activities today.

♦

As the stochastic oscillators expanded its “sell” signal, the 14-day RSI hooked lower from the recent overbought region. This implies further technical pullback underway.

♦

As such, the index may risk falling below the 10-day SMA of 1,330 today. Next supports are seen near the 2.6pts technical gap at 1,305.03 and the 1,300 psychological level.

♦

Technically, however, we are optimistic that the 10-day SMA will likely be able to absorb the selling pressure and refresh the bargain-hunting activities soon. Please read important disclosures at the end of this report.

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9 April 2010 Daily Trading Strategy:

♦

In line with our expectation, the FBM KLCI staged a technical pullback after enjoying a bullish uptrend for 12 straight days.

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Sealed with a huge bearish candle, and the weakened momentum readings, this could point to a further pullback in the immediate term.

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Having said that, we expect bargain hunters to reemerge near the critical 10-day SMA support of 1,330 and near yesterday’s low of 1,331.46 soon.

♦

But, as a word of caution, a fall from the 10-day SMA will mean a negative change in the short-term trading sentiment. Should this happen, investors should consider exiting their short-term position.

♦

Lower and firmer supports are only seen near a technical gap of 1,305, and the solid psychological level of 1,300.

♦

Nevertheless, the overall market condition will remain favourable, if the index sustains at above the 10-day SMA.

♦

Also, it will be an upward advantage if the daily turnover maintains at above the 1.0bn shares mark.

Table 1 : Daily Statistics Scoreboard 2 Apr Gainers 430 Losers 244 Unchanged 306 Untraded 373 Market Cap Turnover (mln shares) Value (RM mln) Currency MYR vs US Dollar

5 Apr 403 322 289 339

6 Apr 406 369 288 295

7 Apr 396 366 289 312

8 Apr 239 476 292 351

828

1,053

1,122

1,134

1,279

1,180

1,308

1,545

1,648

1,737

3.2460

3.2285

3.2130

3.2100

3.2050

Source: RHBInvest & Bloomberg

Table 2 : Major Indices & Commodities Change Local Key Indices Closing (Pts) FBM KLCI 1,332.93 -12.16 FBM 100 8,789.78 -86.81 FBM ACE 4,254.25 -20.07 Major Overseas Indices Dow Jones Nasdaq S&P 500 FTSE Hang Seng Jakarta Composite Nikkei 225 Seoul Composite Shanghai Composite SET FT Straits Times Taiwan Weighted India Sensex Major Commodities NYMEX Crude Oil (US$/barrel) MDEX CPO – Third Month (RM/metric ton) US Interest Rate Overnight Fed Fund Rate Next FOMC meeting

Change (%) -0.9 -1.0 -0.5

10,927.07 2,436.81 1,186.44 5,712.70 21,867.04 2,850.83 11,168.20 1,733.78 3,118.71 783.93 2,963.19 8,057.60 17,714.40

29.55 5.65 3.99 -49.36 -61.73 -47.75 -124.63 7.18 -29.51 -28.70 -24.91 -64.18 -255.62

0.3 0.2 0.3 -0.9 -0.3 -1.6 -1.1 0.4 -0.9 -3.5 -0.8 -0.8 -1.4

85.39

-0.49

-0.6

2,500.00 Current

-39.00 -1.5 Last Updated 16 Mar 0-0.25% Unch 2010 27-28 Apr 2010

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9 April 2010

Chart 4: FKLI Intraday

Chart 3: FKLI Daily

Technical Interpretations:

♦

Taking cues from the bearish overseas sentiment, the local futures market extended its losing streak for a second day on Thursday.

♦

Despite attempting to recover in the afternoon session, the FKLI’s downward pressure intensified towards the late session after European markets suffered strong selldown in their early sessions.

♦

This resulted in 11.00 pts or 0.82% loss on the FKLI’s Apr contract. It finished at 1,332.00.

♦

On the chart, the futures index ended on the dot of the 10-day SMA, but accumulated its second bearish candle in a row.

♦

Dampened further by the poor momentum readings, there could be further setback towards the next support level at the technical gap near 1,320.50 - 1,327.50, if the FKLI fails to rebound today.

♦

In fact, traders should get ready to lock in profits from their short-term “long” position, if the 10-day SMA gives way today. Rethink of another “long” call again nearer to 1,320.50 - 1,327.50 region.

♦

But for the medium-term viewpoint, the bullish uptrend remains intact as long as the futures index sustains at above the 1,300 psychological level and the 40-day SMA of 1,299.

Daily Trading Strategy:

♦

The 10-day SMA of 1,333 offered a strong support for the FKLI yesterday.

♦

Cautiously, however, traders should beware that a loss of the 10-day SMA today could lead to a further retracement towards the lower support region near 1,320.50 - 1,327.50.

♦

The futures index is expected to swing from 1,328 to 1,337 today.

Table 3: FKLI Closings FKLI (Month) Contracts Open Apr 10 1340.00 May 10 1340.00 Jun 10 1337.00 Sep 10 1336.50

High 1340.50 1340.00 1337.00 1336.50

Low 1329.00 1328.00 1327.50 1327.00

Close 1332.00 1328.00 1328.00 1327.00

Chg (Pts) -11.00 -14.50 -12.50 -13.00

Settle 1332.00 1328.00 1331.00 1329.00

Volume 5009 263 126 78

Open Interest 18871 424 490 189

Source: Bursa Malaysia

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9 April 2010

Chart 5: US Dow Jones Industrial Average (DJIA) Daily

Chart 6: US Nasdaq Composite Daily

US Market Leads:

♦

Thanks to surprisingly strong retail sales in Mar, the US major gauges managed to reverse the early selloff by turning higher yesterday.

♦

It was reported that same-store sales at major retail chains jumped 9.1% in Mar, exceeding forecast of a 6.3% rise. As a result, this rekindled hopes that the US economic recovery is still on track.

♦

Also, US stocks recouped their early loss ground after European Central Bank President Jean-Claude Trichet said he does not expect Greece to default and news that Greece’s first-quarter budget deficit has declined.

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Among key retail stock gainers include Target Corp (+3.0%) and Gap Inc (3.1%).

♦

In contrast, crude oil prices extended its losing leg for a second day, as an increase in the weekly jobless claims and higher crude inventories overwhelmed news of strong retail sales. The US light sweet crude oil futures for May delivery slipped another US$0.49 or 0.6% to US$85.39/barrel.

Technical Interpretations: Dow Jones Industrial Average (DJIA)

♦

On Thursday, the US DJIA unexpectedly bounced back by gaining 29.55 pts or 0.27% to 10,927.07.

♦

Closing with a “positive harami” candle, the chart suggests the previous selling momentum has slowed down.

♦

But due to mixed momentum readings, the index still has to remove the recent high of 10,988.06 to reclaim its bullish momentum towards the 11,000 mild psychological level and the upside target at 11,250.

♦

Otherwise, it could extend its consolidation at between 10,850 and the recent high of 10,988.06.

♦

Apart from the strong support at 10,850, the next solid support is at the 21-day SMA near 10,805.

Nasdaq Composite (Nasdaq)

♦

The Nasdaq Composite Index also staged a mild rebound, rising 5.65 pts or 0.23% to 2,436.81.

♦

As it acquired a “bullish” candle engulfing the previous “harami” candle, there could be a possible rebound today.

♦

But to convince the bulls, a swift penetration of the recent high of 2,443.50 is crucial for it to push its gains toward the immediate upside target at 2,470.

♦

Strong downside supports remain near the 21-day SMA of 2,397 and the resistance-turn-support level of 2,330. A comprehensive range of market research reports by award-winning economists and analysts are exclusively available for download from www.rhbinvest.com

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Daily Technical Watch: Chart 7: TimeCom Daily

Chart 8: TimeCom Intraday

Time DotCom (5031) Another positive candle will prompt a fresh “buy” signal…

♦

After breaking above the tough RM0.30 hurdle in Apr 2009, the share price of TimeCom rallied to a high of RM0.46 in May, but succumbed to heavy profit-taking activities thereafter.

♦

As a result, the stock began a wide consolidation phase, running from RM0.345 to RM0.46 for most of the time from May 2009 to Mar 2010.

♦

But, when the stock reclaimed the RM0.41 level in mid-Mar 2010, its upward momentum increased and the 10day SMA cut above the 40-day SMA to indicate a bullish turn on the medium-term chart outlook.

♦

Subsequently, it broke out from the RM0.46 high and the RM0.47 resistance level in late Apr 2010.

♦

The stock touched a high of RM0.525, before building up a congestion area in the recent trading. It ended on the dot of the 10-day SMA at RM0.50 yesterday.

♦

Registered with a positive candle, the stock has a chance for a revival of its upward momentum soon.

♦

Given the improved participation level yesterday, another positive candle will prompt a fresh “buy” signal on the stochastic socillators.

♦

Immediate resistance level is at Mar’s high of RM0.525, followed by the RM0.54 level.

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A successful removal of RM0.54 will accelerate its momentum to RM0.60. Support is seen at RM0.47.

Technical Readings:

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10-day SMA:

RM0.499

♦

40-day SMA:

RM0.4247

♦

Support:

IS = RM0.47

S1 = RM0.41

S2 = RM0.345

♦

Resistance:

IR = RM0.54

R1 = RM0.60

R2 = RM0.705

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IMPORTANT DISCLOSURES This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time have an interest in the securities mentioned by this report. This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this report. RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans of any company that may be involved in this transaction. “Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors, officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports. This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel. The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues. Technical recommendation framework for stocks and sectors are as follows: Technical Recommendation: Trading Buy = Short-term positive opportunity spotted. It is an aggressive trading recommendation with a book to sellers’ price for short-term technical upside. Bargain Buy = Short-term positive but technical signals have yet to trigger a rally. Traders can park and queue for their desired entry level within a small range. Buy on Weakness = Short- to Medium-term positiveness anticipated, but technical readings are still negative. Traders can pick-up the stock for future rally. Sell on Strength = Short-term momentum still positive, Traders are advice to lock in profit base on current strength. Take Profit = Short-term target achieved. Traders are advice to exit before the technical readings turn bearish. Avoid = Risky situation in the short-term and high volatility expected on the share price. Traders’ best strategy is staying away until it stabilises. Technical Time Frame: Immediate-term = short time frame within a contra period. Short-term = moderate time frame within two to three contra periods. For tracking purposes, we refer to 10 trading days. Medium-term = medium time frame usually refers to two to three weeks period. For tracking purposes, we refer to 20 trading days. Technical recommendations are generally short-term in nature and may differ from RHBRI’s equity fundamental view and recommendation on the same company. RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. securities, subject to the duties of confidentiality, will be made available upon request.

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