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PP 7767/09/2010(025354)

Malaysia

MARKET DATELINE

PP 7767/09/2010(025354) Mala y sia MARKET DATELINE Technical Research Daily Trading Strategy Market Technical Reading

Technical Research

Daily Trading Strategy

Market Technical Reading

Volume Growth Crucial To Sustain This Rebound

Reading Volume Growth Crucial To Sustain This Rebound RHB Research Institute Sdn Bhd A member of

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

Company No: 233327 -M

9 July 2010

Chart 1: FBM KLCI Daily

Company No: 233327 -M 9 July 2010 Chart 1: FBM KLCI Daily Chart 2: FBM KLCI

Chart 2: FBM KLCI Intraday

July 2010 Chart 1: FBM KLCI Daily Chart 2: FBM KLCI Intraday Local Market Leads: ♦

Local Market Leads:

Bursa Malaysia extended its recent winning streak on Thursday, but gains were limited as investors turned cautious ahead of Bank Negara’s Monetary Policy Committee (MPC) meeting announcement.

The local benchmark FBM KLCI opened the day firmly in response to a 275-pts rally in the overnight US DJIA, but profit-taking activities quickly stepped in in late morning prompting the index to pare its early gain.

But thanks to the last-minute buying activities, the FBM KLCI settled higher for the third straight day at 1,316.03, gaining 4.28 pts or 0.33% for the day.

Regionally, investors were optimistic on the upcoming second-quarter earnings reporting season in the US, and cheered on news that the International Monetary Fund (IMF) has raised the global economic growth forecast to 4.6% for 2010, from 4.2%.

Trading interest, however, remained subdued with only 533m shares changing hands, compared with 540m shares traded a day earlier. There were 365 gainers against 242 losers.

After the market closed, Bank Negara announced its decision to hike its overnight policy rate (OPR) by 25bps to

2.75%.

Technical Interpretations:

The FBM KLCI opened strongly with a 1-pt gap, and climbed to above the 10-day SMA of 1,314, before closing the day with a small positive candle.

Collecting its third positive candle on the chart, the index is likely to continue the current upswing, in our view.

Further upside will lead the index to the recent high of 1,335.31 and to retest the 1,350 significant resistance level.

However, as the index merely closed 2 points above the 10-day SMA, further confirmation is needed to avoid a sharp pullback to cover the 1-pt technical gap.

For now, strong supports can be found near the 40-day SMA of 1,304 and the key psychological level of 1,300.

Please read important disclosures at the end of this report.

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Daily Trading Strategy: 9 July 2010 ♦ As highlighted earlier, the removal of the 10-day

Daily Trading Strategy:

9 July 2010

As highlighted earlier, the removal of the 10-day SMA of 1,314 with another positive candle on the chart has confirmed that a technical rebound is underway for the FBM KLCI.

Buoyed further by the upbeat momentum readings, the benchmark stands a good chance to extend its upside towards June’s high of 1,335.31 and even to retest the tough hurdle of 1,350 in the near term.

But critically, the index must sustain at above the 10-day SMA in the near term in order to avoid a sudden pullback on profit-taking pressure.

Also, crucially, the daily turnover should grow in the coming sessions for trading sentiment to improve further and ultimately to sustain the current recovery leg.

Otherwise, the index will risk falling back to below the 10-day SMA, which will threaten this rebound, in our view.

Table 1 : Daily Statistics

Scoreboard

02 Jul

05 Jul

06 Jul

07 Jul

08 Jul

Gainers

286

182

405

275

365

Losers

300

425

195

307

242

Unchanged

263

270

273

272

275

Untraded

514

484

488

506

478

Market Cap

Turnover

(mln shares)

626

450

622

540

533

Value (RM

mln)

974

718

970

919

971

Currency

MYR vs US Dollar

3.2220

3.2060

3.2040

3.2185

3.2015

Source: RHBInvest & Bloomberg

Table 2 : Major Indices & Commodities

Local Key Indices

Closing

Change

Change

(Pts)

(%)

FBM KLCI

1,316.03

4.28

0.3

FBM 100

8,659.52

33.50

0.4

FBM ACE

3,769.85

12.48

0.3

Major Overseas

Indices

Dow Jones

10,138.99

120.71

1.2

Nasdaq

2,175.40

15.93

0.7

S&P 500

1,070.25

9.98

0.9

FTSE

5,105.45

90.63

1.8

Hang Seng Jakarta Composite Nikkei 225 Seoul Composite Shanghai Composite SET FT Straits Times Taiwan Weighted India Sensex Major Commodities

20,050.56

193.49

1.0

2,915.91

13.87

0.5

9,535.74

256.09

2.8

1,698.64

22.99

1.4

2,415.15

-5.97

-0.2

817.57

2.89

0.4

2,897.15

36.12

1.3

7,608.85

74.39

1.0

17,651.73

180.70

1.0

NYMEX Crude Oil (US$/barrel) MDEX CPO – Third Month (RM/metric ton) US Interest Rate

75.44

1.37

1.8

2,290.00

20.00

0.9

Current

Last Updated

 

22-23 Jun

Overnight Fed Fund Rate

0-0.25%

Unch

2010

Next FOMC meeting

10 Aug 2010

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Chart 3: FKLI Daily Technical Interpretations: 9 July 2010 Chart 4: FKLI Intraday ♦ Local

Chart 3: FKLI Daily

Chart 3: FKLI Daily Technical Interpretations: 9 July 2010 Chart 4: FKLI Intraday ♦ Local futures

Technical Interpretations:

9 July 2010

Chart 4: FKLI Intraday

Interpretations: 9 July 2010 Chart 4: FKLI Intraday ♦ Local futures market sentiment ran high on

Local futures market sentiment ran high on Wall Street’s overnight rally yesterday. The local futures index staged a nearly 1% rally for the day.

But just after hitting an intraday high of 1,322.50 (+18.0-pts), the FKLI began to encounter strong profit-taking activities. The FKLI for Jul contract ended up by 12.00 pts or 0.92% to 1,316.50, with a 7.5-pt gap on the chart.

As the futures index has successfully climbed to above the 10-day SMA of 1,312 yesterday, chances for a sustainable recovery ahead have increased.

Added with a renewed uptick signal on the short-term momentum indicators, the futures index could extend its recovery momentum towards the recent high of 1,342 in the near term, if it sustains at above the 10-day SMA.

Beyond that, it will rechallenge the 1,352.5 high recorded in May, which will then boost the medium-term outlook on the FKLI.

However, a strong follow-through buying momentum is still required today, to avoid a sudden plunge on the trading sentiment. If not, selling may return to press the futures index lower to below the 10-day SMA and to cover the technical gap created recently.

Further support is seen near the 40-day SMA of 1,304, closer to the 1,300 psychological level.

Daily Trading Strategy:

Yesterday’s clearance of the 10-day SMA marks a confirmation for further technical recovery ahead.

Still, the FKLI must sustain at above the 10-day SMA to prolong this rebound, in our view.

Meanwhile, the futures index is projected to swing from 1,310 to 1,324 today.

Table 3: FKLI Closings

FKLI (Month)

Contracts

Open

High

Low

Close

Chg (Pts)

Settle

Volume

Open Interest

Jul 10

1319.00

1322.50

1315.00

1316.50

12.00

1316.50

5578

16243

Aug 10

1319.00

1321.50

1314.50

1314.50

11.50

1314.50

298

267

Sep 10

1316.50

1320.50

1315.00

1316.00

12.50

1316.00

157

538

Dec 10

1317.50

1317.50

1315.50

1315.50

11.50

1316.00

6

244

Source: Bursa Malaysia

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

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

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

Chart 5: US Dow Jones Industrial Average (DJIA) Daily US Market Leads: 9 July 2010 Chart

US Market Leads:

9 July 2010

Chart 6: US Nasdaq Composite Daily

Chart 6: US Nasdaq Composite Daily

Nasdaq Composite Daily Chart 6: US Nasdaq Composite Daily ♦ As the bulls charged forward, the

As the bulls charged forward, the US stocks expanded its rally for a third day on Thursday, buoyed by a fall in jobless claims as well as improved June sales data from most of the retailers.

According to the US Labour Department, initial claims for jobless benefits dropped by 21,000 to 454,000 in the week ended July 3, exceeding the expectation of a 12,000 decline.

Retailer, Abercrombie & Fitch surged 7.8% after same-store sales rose 9%, beating expectation of 5.5%. Limited Brands advanced 2.2% after its sales increased 6%.

Also, investors reacted positively to the IMF’s hike on the 2010 global economic growth forecast.

In response to a decline in the US crude inventories and jobless claims, the US light sweet crude oil futures for August delivery rose another US$1.37 or 1.8% to US$75.44/barrel.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

As buying momentum revived in late session, the US DJIA pushed for further gain by posting another solid 120.71 pts or 1.20% gain, ending at 10,138.99 on Thursday.

With that, it has successfully crossed above the 21-day SMA of 10,124 with a third bullish candle on the chart. Technically, the solid closing with an uptick on the 21-day SMA points to further upside ahead.

But as we stressed earlier, the DJIA must cross above the immediate resistance of 10,150 to confirm a meaningful technical rebound towards the recent high of 10,594.16 and the major hurdle at 10,850.

If it fails, profit-taking pressure could reemerge quickly with the immediate supports seen at the 21-day SMA and the 10,000 psychological level.

Nasdaq Composite (Nasdaq)

The Nasdaq Composite index added 15.93 pts or 0.74% to 2,175.40 yesterday on follow-through buying support.

Chart wise, it recorded a “doji-like” candle, indicating the current rebound could take a pause.

Still, based on the recent buoyant recovery strength, it is still capable to retest the 2,190 level and to close a technical gap near the 21-day SMA of 2,211 soon.

Immediate support is now at 2,100, followed by the 2,000 level.

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Daily Technical Watch: Chart 7: Magna Daily Magna Prima (7617) 9 July 2010 Chart 8:

Daily Technical Watch:

Chart 7: Magna Daily

Daily Technical Watch: Chart 7: Magna Daily Magna Prima (7617) 9 July 2010 Chart 8: Magna

Magna Prima (7617)

9 July 2010

Chart 8: Magna Intraday

Daily Magna Prima (7617) 9 July 2010 Chart 8: Magna Intraday Still need to remove RM0.87

Still need to remove RM0.87 and the 40-day SMA of RM0.86 to turn bullish…

The share price of Magna kicked off a powerful rebound after breaking out from the sideways consolidation trend at between RM0.485 and RM0.60 in Nov 2009.

The stock rallied across the RM0.87 level in Jan 2010 and hit a high of RM1.05 in early Feb 2010, prior to a profit- taking phase where it congested around the region of RM0.87 to RM1.05.

In late Mar 2010, after it failed its second attempt to cross the RM1.05 tough hurdle, it fell lower to below the 10- day and 40-day SMAs, prompting a series of selling waves since Apr 2010.

During that period, the stock’s 10-day SMA has fallen to below the 40-day SMA, indicating a medium-term bearish signal on the chart.

Its technical outlook continued to deteriorate in Jun, when it gave up the key support at RM0.87.

However, in recent trading, after hitting a low of RM0.73, the stock launched a strong technical rebound, rallying for three straight days in a row, reclaiming the RM0.75 level and closed near the RM0.87 support-trun-resistance level at RM0.855 yesterday.

Sealed with “Three White Soldiers” candle, and the reversal signals on the momentum indicators, the sotck is due to stage further climb in the near term.

However, given a tough overhead resistance at RM0.87, and the 40-day SMA near RM0.86, its technical outlook has yet to turn bullish, in our view.

It must first secure these hurdles, before it can move into the RM0.87 – RM1.05 higher trading range.

Technical Readings:

10-day SMA:

RM0.81

40-day SMA:

RM0.862

Support:

IS = RM0.75

S1 = RM0.60

S2 = RM0.485

Resistance:

IR = RM0.87

R1 = RM1.05

R2 = RM1.15

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IMPORTANT DISCLOSURES 9 July 2010 This report has been prepared by RHB Research Institute Sdn

IMPORTANT DISCLOSURES

9 July 2010

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. Additional information on recommended securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the actions of third parties in this respect.

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