Market Technical Reading : Extension Of Buying Momentum Upon Removal Of 1,500...-15/10/2010

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Local Market Leads:

♦ The FBM KLCI reversed from the early run-up to above the psychological level of 1,500 on heavy profit-taking

pressure, partly due to refreshed cautiousness ahead of the 2011 Budget announcement on Friday.

♦ Earlier, investors continued to drive the market higher, thanks to the overnight gains in the US markets amid

favourable earnings from US key corporates.

♦ But just after the FBM KLCI advanced to a high of 1,503.82, profit-taking activities began to step in, amid the

afternoon reversal in some regional markets from their early gains.

♦ At the close, the local benchmark eased by 0.59 pt or 0.04% to 1,496.38, dogged by strong selldown on

heavyweights Genting (-26sen) and CIMB (-7sen).

♦ Daily turnover continued to increase to 1.27bn shares, from the 1.20bn shares a day ago. The market breadth has,

however, turned negative, as losers outpaced gainers by 455 to 348.

Technical Interpretations:

♦ As profit-taking activities set in, the FBM KLCI pulled back from the fresh multi-year high of 1,503.82 to close with

a negative candle.

♦ Despite its ability to bounce back from a day low of 1,490.57 (-6.40 pts), the negative candle implies further

weakness likely for today.

♦ Furthermore, with the weakening trend on the short-term momentum indicators, the upward momentum is

expected to turn even slower today.

♦ Having said that, we are of the view that the current uptrend will likely stay intact as long as the index can sustain

at above the 10-day SMA of 1,481 and the medium-term breakout point of 1,450.

♦ Optimistically, it will likely resume its rally to the all-time high of 1,524.69 once the profit taking is done.

Chart 1: FBM KLCI Daily Chart 2: FBM KLCI Intraday

Techn ica l Research

Da i l y T rad ing S t r a t egy

Market Technical ReadingExtension Of Buying Momentum Upon Removal Of 1,500...

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RHB ResearchInstitute Sdn BhdA member of theRHB Banking GroupCompany No: 233327 -M

15 October 2010

Please read important disclosures at the end of this report.



15 October 2010



Daily Trading Strategy:

♦ As investors turned cautious ahead of the 2011 Budget announcement due today, amid uncertainties in the

regional markets’ direction, investors locked in their profits when the FBM KLCI surpassed above the 1,500

psychological threshold at one stage yesterday.

♦ Chart wise, further weakness could be expected, judging from its failure to sustain at above 1,500 yesterday, and

the record of the weaker technical readings on the chart.

♦ Added that the weekend is just around the corner, nervous investors might opt for lesser exposure ahead of the

Budget 2011 announcement today. At the same time, the aggressive ones may continue to trade on the

speculative issues. This points to a volatile trading today.

♦ Nevertheless, we expect the downside to be limited, with the solid support seen near the supportive 10-day SMA

of 1,481 and the critical breakout point at 1,450.

♦ In fact, we do not rule out the possibility of an extension of buying momentum, if the index manages to reclaim

1,500 in the early trading today. The next target resistance is at 1,524.69.

Source: RHBInvest & Bloomberg

Table 2 : Major Indices & Commodities

Local Key Indices ClosingChange(Pts)

Change(% )

FBM KLCI 1,496.38 -0.59 0.0FBM 100 9,846.73 4.94 0.1FBM ACE 4,180.77 25.16 0.6

Major OverseasIndices

Dow Jones 11,094.57 -1.51 0.0Nasdaq 2,435.38 -5.85 -0.2

S&P 500 1,173.81 -4.29 -0.4FTSE 5,727.21 -20.14 -0.4

Hang Seng 23,852.17 394.48 1.7

Jakarta Composite 3,618.48 6.50 0.2Nikkei 225 9,583.51 180.00 1.9Seoul Composite 1,899.76 23.61 1.3Shanghai Composite 2,879.64 18.28 0.6SET 993.72 1.12 0.1Straits Times 3,195.02 -7.14 -0.2

Taiwan Weighted 8,215.45 108.79 1.3India Sensex 20,497.64 -190.24 -0.9

Major Commodities

NYMEX Crude Oil(US$/barrel) 82.69 -0.32 -0.4FCPO – Third Month(RM/metric ton) 2,916.00 -14.00 -0.5US Interest Rate Current Last Updated

Overnight Fed Fund Rate 0-0.25% Unch21 Sep2010

Next FOMC meeting 2-3 Nov 2010

Table 1 : Daily StatisticsScoreboard 8 Oct 11 Oct 12 Oct 13 Oct 14 Oct

Gainers 397 479 327 576 348Losers 332 287 420 236 455Unchanged 301 293 306 356 302Untraded 324 296 308 296 260

Market Cap

Turnover(mln shares) 1,075 1,094 1,169 1,200 1,274Value(RM mln) 1,657 1,715 1,901 2,027 2,042

Currency

MYR vs USDollar 3.1125 3.0995 3.1080 3.0925 3.0820



15 October 2010




♦ The local futures index ended unchanged after a volatile session on Thursday, as traders liquidated their “long”

position once the FKLI broke above the 1,500 psychological barrier for the first time in 33 months.

♦ From a high of 1,501.0, the FKLI succumbed to a constant profit-taking pressure and drifted lower to 1,488.0,

before closing unchanged at 1,492.0 for the day, thanks to the slight bargain-hunting support in the late session.

♦ But, the FKLI still ended the day with a negative candle and weaker short-term momentum readings. This

indicates a possible follow-through profit-taking dip today.

♦ In other words, if there is no immediate rebound to above 1,500 in the near term, the FKLI will be set for a short-

term retreat.

♦ Having said so, we are still looking forward for the 10-day SMA of 1,481 to cap its near-term downside.

♦ Should it build a base near the 10-day SMA, buying may still resume promptly, in our view.

♦ Higher up, its immediate resistance is at the technical gap end at 1,502.5. Upon closure of the gap, the FKLI will

likely gear up for a challenge of the all-time high level of 1,536.

Daily Trading Strategy:

♦ With a negative candle and the weaker momentum readings, the FKLI could see more retreat today.

♦ But as long as the 10-day SMA of 1,481 can hold, traders should stay positive and be ready to relaunch their

“long” call.

♦ All in, we remain bullish on the current uptrend.

♦ The FKLI is projected to move from 1,485 to 1,505 today.

Table 3: FKLI ClosingsFKLI (Month)Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest

Oct 10 1497.50 1501.00 1488.00 1492.00 Unch 1492.00 4972 23237Nov 10 1497.50 1501.00 1491.00 1492.50 0.50 1492.00 221 189Dec 10 1497.00 1500.00 1490.00 1491.00 -1.50 1492.50 87 375Mar 11 1494.50 1495.00 1494.50 1495.00 2.50 1492.50 3 129

Source: Bursa Malaysia

Chart 3: FKLI Daily Chart 4: FKLI I ntraday



15 October 2010



US Market Leads:

♦ Weighed down by the selldown in financial stocks amid concerns over banks’ foreclosure practice, Wall Street

ended lower on profit-taking activities.

♦ Investors sold financial stocks as all 50 US states are investigating the mortgage industry, as the authority

suspected that banks used false documents and signatures to justify hundreds and thousands of foreclosures.

♦ Dow components, Bank of America (-5.2%) and JPMorgan & Chase (-2.8%) led the downside, after both banks

temporarily halted home foreclosure to review their foreclosure practice. But after falling over 70-pts at one time,

the Dow slowly pared down its losses on late bargain-hunting supports.

♦ On the NYMEX, the US light sweet crude oil futures for Nov delivery eased 32cents or 0.4% to US$82.69/barrel.

♦ After the close, Google and AMD rallied more than 9% and 7% respectively on stronger-than-expected earnings.


Dow Jones Industrial Average (DJIA)

♦ Thanks to the late bargain-hunting activities, the DJIA trimmed down its decline by easing only 1.51 pts or 0.01%

to 11,094.57 on yesterday.

♦ But as it ended with a “doji” candle, plus easing short-term momentum readings, this still paints uncertainties in

the immediate direction.

♦ Having said that, as long as the 11,000 level can hold, the near-term upswing leg towards the next resistance

target at 11,250 and the Apr’s high of 11,258.01 will likely stay intact, in our view.

♦ Besides, the lower supports at 11,000 and the breakout point at 10,850 near the 21-day SMA are likely to protect

the current uptrend.

Nasdaq Composite (Nasdaq)

♦ After enjoying a decent rally, the Nasdaq Composite index succumbed to mild profit-taking pressure yesterday. It

slipped 5.85 pts or 0.24% to 2,435.38 for the day.

♦ With a “negative harami” candle on the chart, it points to a slowdown in the recent bullish momentum.

♦ This means it could ease to cover the recent technical gap at 2,421.79 and even the 21-day SMA of 2,371 soon.

But we stay bullish as it remains at above 2,330, and foresee a target at 2,470 and the Apr’s high of 2,535.28.

Chart 5: US Dow Jones I ndustrial Average (DJIA) Daily Chart 6: US Nasdaq Composite DailyChart 5: US Dow Jones I ndustrial Average (DJIA) Daily Chart 6: US Nasdaq Composite Daily



15 October 2010



Daily Technical Watch:

Time dotCom (5031)

A successful breakout of RM0.705 w ill trigger further rally in the near term…

♦ After a downtrend in Apr and May, the share price of TimeCom found a support near the RM0.41 level.

♦ It regenerated its upward momentum and turned positive when the 10-day SMA cut above the 40-day SMA near

RM0.42 in Jun.

♦ When it finally rallied across the RM0.47 level in Jul, it triggered a sharp rally with a strong follow-through buying

momentum and surpassed the resistances at RM0.54 and RM0.60.

♦ However, after touching an intraday high of RM0.725, the stock fell instantly to below the RM0.705 tough

resistance level and kick-started a steep correction. It fell back into the RM0.47 – RM0.54 range.

♦ On a technical rebound triggered in early Sep, the stock surpassed the RM0.60 level and it has been forming a

base at above the key RM0.60 support for the past few weeks.

♦ Yesterday, the stock registered a huge bullish candle to close positively at RM0.68, with fresh positive crossover

on the momentum indicators.

♦ Technically, the stock has broken out of the RM0.65 congestion level and is undergoing a fresh bullish upswing.

♦ Given the positive uptick on the 10-day SMA from the 40-day SMA recently, the stock could trigger another

breakout signal if it crosses the key resistance level at RM0.705 on follow-through buying support soon.

♦ Upon a successful breakout, it will likely head towards the RM0.80 and RM0.94 region in the near term.

♦ Its medium-term support is seen at RM0.60.

Technical Readings:

♦ 10-day SMA: RM0.645

♦ 40-day SMA: RM0.6101

♦ Support: IS = RM0.60 S1 = RM0.54 S2 = RM0.47

♦ Resistance: IR = RM0.705 R1 = RM0.80 R2 = RM0.94

Chart 7: TimeCom Daily Chart 8: TimeCom Intraday

Market Technical Reading : Extension Of Buying Momentum Upon Removal Of 1,500...-15/10/2010

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