22nd August 2011, Monday – Weekly Market Outlook

SUMMARY

	Stock	Futures
		FKLI	FCPO
Today Strategy & Stock Pick	For Risk Taker Stock: Will not encourage stock accumulation at this down trend.	Risk Taker: Hold on to previous short position Risk Averse: Hold on to previous short position	Range trading, 3000 - 3045
	For Risk Averse Stock: Should remain sideline, follow overall market direction.
Stop Loss	Nil	1510 - 1515	Risk Taker: 2910 - 2900 Risk Averse: 2980 - 2970
Market Direction	KLCI: Downtrend	Firmly Downtrend	Further sideway trading is expected until either direction is being taken out (at the triangle)
Support & Resistance level	KLCI: S1: 1474 S2: 1450 R1: 1489 R2: 1500	Support: S1: 1474; S2: 1450	Support: S1: 3000; S2: 2910
		Resistance: R1: 1491; R2: 1500	Resistance: R1: 3045; R2: 3100
Initial Margin	-	RM5000	RM8500
World News	Stock market begins to feed economic fear. Bank of America cutting 3500 of jobs. BoJ may ease policy again.

DETAIL

KLCI


Downtrend Confirmed!

FBMKLCI closed lower last Friday, sending a clear message to us – downtrend confirmed! Why? There are a few indicators shown the clear message, included:-

a) Lower high1

b) Trading way below the SMA 200

c) Trading below the uptrend line

d) SMA 50 shown a clear downward trading

Now, the question is how bad it can be? In my view, coming 1 to 2 months will see the index follow the world indices and further major downward trading is expected. As mentioned before, the immediate important support should remain at 1474 level (recent reliable support level), failure for this level to be supported, the index will retrace to 1450 level.

Explanation:

1) Lower High: The high is getting lower

FKLI

Similar as FBMCKLI – Downtrend

Without hesitation, the FKLI remains downward trading and the overall technical landscape did not change with the immediate support is seen at 1467 level, followed by recent low of 1427 level. The downward trading supported by the same reasons as per mentioned in the FBMKLCI above. Investors can remain holding short position and fresh initiation of short position for those late comers shall only set in whenever there is any technical rebound.

Explanation:

1) Dark Cloud Cover: In Candlestick pattern, this is a bearish reversal pattern.

FCPO

Clear Direction will Reveal Soon!

The FCPO as per expected faced with the strong resistance at the 3080 level and retraced back to 3000 level. The overall technical landscape did not change as well if compared to the previous week. Let me recap on what I have mentioned last week:-

1) Long term market remains resilient above the trendline (shown below in Chart 1) and this shall serve as an important and reliable support, at least for now.

2) With the trendline serves as our stop loss level (for those risk averse investors, +/-20 points below 3000 can serve as your stop loss point), I can say that it is worthwhile at this level to take a long position even the fundamental is not that strong.

Besides, refer to chart 2 below, the FCPO currently is trading in the triangle, indicating the FCPO will have a clear direction (either way) in near term and this shall serve as an important reference level for near to mid-term trading. Immediate support is seen at RM3000/MT, followed by recent low of RM2915/MT level and the resistance is seen at RM3045/MT level (Fibonacci of 23.6% level), followed by the downtrend line of RM3080 – RM3100/MT level.

Chart 1:

Chart 2:

15th August 2011, Monday – Weekly Market Outlook

SUMMARY

	Stock	Futures
		FKLI	FCPO
Today Strategy & Stock Pick	For Risk Taker Stock: Kulim	Risk Taker: Short @ 1489 Risk Averse: Short @ 1500	Long
	For Risk Averse Stock: Should remain sideline, follow overall market direction.
Stop Loss	Kulim: RM3.48 – RM3.45	1510 - 1515	Risk Taker: 2980 - 2970 Risk Averse: 2910 - 2900
Market Direction	KLCI: Downtrend	Downtrend, temporary technical rebound	Uptrend Expected
Support & Resistance level	KLCI: S1: 1474 S2: 1450 R1: 1489 R2: 1500	Support: S1: 1474; S2: 1450	Support: S1: 3000; S2: 2910
		Resistance: R1: 1491; R2: 1500	Resistance: R1: 3080; R2: 3150
Initial Margin	-	RM3000	RM6250
World News	·         Dollar falls on Fed’s pledge to maintain key interest rate at record low. ·         US consumer confidence dropped to three-decade low.

DETAIL

FCPO

Action!

FCPO was closing marginally above my mentioned reference level (RM3000/MT) on last Friday. This attracted me to do further analysis on this wonderful product. Let us look at two different charts, one for long term view and one for near term market outlook.

Refer to the chart 1 below, the green color trendline showed that the long term market remains resilient above this trendline and this shall serve as an important and reliable support, at least for now.

With this trendline serves as our stop loss level (for those risk averse investors, +/-20 points below 3000 can serve as your stop loss point), I can say that it is worthwhile at this level to take a long position even the fundamental is not that strong.

For near term market movement, please refer to the chart 2 below. All the above-mentioned stop loss levels shall remain in place and the first resistance shall be seen at the trendline shown in the chart 2 (RM3080 – RM3100/MT), followed by the Fibonacci level of 23.6% (RM3162/MT).

Chart 1:

 Chart 2:

FBMKLCI & FKLI

Remain Range Trading with some Technical Rebound

Before I start with a new week’s market view, hope to take this opportunity to do some important recap on last week’s sharing.

1)      Market firmly bearish with long term outlook facing more challenges ahead.

2)      Short term technical rebound is expected to resume as it is currently oversold.

3)      First time (since the index became only 30 members) the FBMKLCI dropped below the SMA 200.

4)      Range trading is expected (1465 – 1500 level)

5)      Market will remain its volatility and this is not a level for bargain hunting

Ahead of the week, the index is facing with tough resistance at the 1491 level, followed by 1500 level. I will be looking at the level of 1500 to initiate a short position with stop loss level being placed around the 1512 level. Besides, if the index not able to support above the 1474 level, the chances will be very high for the index to trade below 1450 level.

STOCK PICK

Kulim

Last Done: RM3.66

Sector: Plantation

Kulim last Friday convincingly broke through the Bollinger middle band, this may indicate the near term upward trading. Besides, the stock is staying above the SMA 30 with the overall trend remains uptrend. Investors can initiate position around last Friday close with the immediate support is seen at RM3.49 and resistance will be seen at year high of RM3.94. Stop loss level shall be set at level below RM3.50.