Bull KLSE Monday March 26, 2007

Monday March 26, 2007

Bulls rule in KL market

Stock Market Signals: A weekly column on the Main Board of Bursa Malaysia by G.M. Teoh

Last close (March 23): 1,235.65 points, up 53.45 points (4.52%) from a week earlier. Week’s high: 1,237.70 points; Week’s low: 1,282.56 points.

Bulls on the KL market exerted their influenced from the word “go” last Monday. Prices surged on renewed buying, which lifted the KL Composite Index (KLCI) above the key resistance levels, and closed Friday with strong gains.

Positive influences linked to the Invest Malaysia 2007 conference and the abolishment of the real property gains tax encouraged many pessimistic traders to turn optimistic.

All round bullish performances in the Asian and US markets and constructive chart developments on both the KLCI and index futures charts provided the bullish support and boosted traders' speculation that the index could stay buoyant from here on.

The market seems to be a bit more optimistic now and people who had stayed on the sideline appear to have re-entered the market.

Unwinding of key index-linked stocks and sell-program slowed last week as hedge funds and large players started to believe the worst of the correction may be behind us and are now looking ahead to fresh correctional high soon.

The benchmark index has so far recovered a hefty 72 points from the US subprime mortgage meltdown-inspired lows a week earlier at 1,159 points.

Last week’s successful penetration and breakout above the vital chart ceiling at the 1,214 level is viewed as a very bullish development.

Barring any overseas negative pressure this week, the index is expected to expand on its bullish momentum and head for a test of the next upside chart hurdle at the 1,245–1,255 levels.

The overall chart picture and technical setting would turn very positive if this chart hurdle is vaulted. An upward breakout from this point on could clear the path for the index to re-visit its bull-run highs at the 1,285-point level and form a double-top chart formation.

However, despite the current bullish technical scenario, the technicals are cautioning the overall outlook would turn negative if the immediate-term chart support at the 1,200–1,185 levels are violated.

Last week, the KLCI gained 53.45 points or 4.52% to close at 1,235.65.

All 13 of the main key component stocks finished in positive territory. Maybank, Bumiputra Commerce, Genting, Maxis Communications, IOI Corp and DiGi.com closed with large gains and supported the index by a combined 13.84 points.

Tenaga Nasional, Telekom, MISC, Public Bank, Sime Darby, Petronas Gas and Plus Expressways ended higher and contributed a combined 3.68 points to the index.

Volume of the KLCI for the week surged to 1.166 billion compared with 999.06 million shares a week earlier.

The daily average volume rose to 233.22 million shares against 199.81 million shares the week before.

All the weekly technical indicators closed Friday on a bullish note and called for a continuation of the upward wave.

The candlestick chart settled the week bullish and pointed to more upward advances this week. Last week’s large white candle suggests the immediate-term momentum is strong.

The weekly stochastic indicated a bullish trend reversal when it triggered the buy signal March 23.

The weekly Money Flow Index remained flat at 73.33 points and showed the recent upward actions had not caused the market to be overbought.

The 3- and 7-week exponentially smoothed moving-average price lines closed the week in bullish divergence and indicated that more strength for the immediate term.

The 9-week RSI settled higher near the positive zones at 65.27 points and signalled the immediate underlying strength of the index had turned bullish.