Market Technical Reading : Sentiment Turning Cautious… - 11/08/2010

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Local Market Leads:

♦ Local bourse ended negative amid lacklustre trading sentiment, as most investors turned cautious after theregional markets’ sentiment was hit by a nearly 3% slump in China markets.

♦ SHComp plunged 2.89%, due to the weaker-than-expected Jul import data that reinforced pessimism over the 2H

economic outlook, while the high property prices dampened hopes of any easing of property credit tightening

policy.

♦ This overshadowed yesterday’s expectation of a possible new stimulus measure to be announced by the US

Federal Reserve on Tuesday’s FOMC meeting.

♦ In response to that, Asian markets ended sharply lower, with Hang Seng and SET losing 1.50% and 1.44%

respectively. Locally, the FBM KLCI eased 0.95 pt or 0.07% to 1,359.71.

♦ As more investors moved sideline ahead of the US FOMC meeting, daily turnover dropped further to 676m shares,

at below the 800m shares mark for a second day. There were 409 counters lost, compared to 255 counters gained.

Technical Interpretations:

♦ In the absence of follow-through buying support, the FBM KLCI failed to stage a rebound from the 10-day SMA of

1,361 yesterday.

♦ Instead, it recorded a small negative candle at slightly below the SMA to suggest a possible negative turn on the

FBM KLCI’s short-term technical outlook.

♦ And with the weakened short-term momentum readings, more follow-through selling activities could be underway.

♦ To prevent a further slide on the index level, bargain-hunting activities must return nearer to the key 1,350 level

or the index must recover to above the 10-day SMA of 1,361 soon.

♦ On the upside, the recent high of 1,370.52 will stay as an immediate resistance for the index.

Chart 1: FBM KLCI Da ily Chart 2: FBM KLCI I ntraday

Techn ica l Research

D a i l y T r a d i ng S t r a t egy

Market Technical ReadingSentiment Turning Cautious…

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

11 August 2010

Please read importan t disclosures at the end of this report.

M a l a s i a

M A

R K E T

D A T E L I N E

P P

7 7 6 7 / 0 9 / 2 0 1 0 ( 0 2 5 3 5 4 )



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Daily Trading Strategy:

♦ Disappointedly, the current profit-taking leg appears longer than expected with the FBM KLCI drifting even lower

than the crucial 10-day SMA of 1,361 yesterday.

♦ The fall to below the SMA, coupled with the reduced daily turnover show that the chart’s short-term outlook could

turn negative in the next few sessions, if the index fails to launch any recovery soon.

♦ Not helping either, the mild T+4 selling pressure expected today from last Thursday’s 994m shares high turnover

could further dampen the short-term sentiment on the local market, in our view.

♦ Therefore, short-term investors should turn cautious for the index to regather its buying support and rebuild a

base between the 10-day SMA and the 1,350 critical support level in the near term.

♦ However, we remain mildly positive on the FBM KLCI’s short- to medium-term chart outlook, until and unless it

breaches to below the 1,350 resistance-turn-support level.

Source: RHBInvest & Bloomberg

Table 2 : Major Indices & Commodities

Local Key Indices ClosingChange(Pts)

Change(% )

FBM KLCI 1,359.71 -0.95 -0.1FBM 100 8,958.16 -8.41 -0.1FBM ACE 3,810.87 -5.83 -0.2

Major Overseas

Indices

Dow Jones 10,644.25 -54.50 -0.5Nasdaq 2,277.17 -28.52 -1.2

S&P 500 1,121.06 -6.73 -0.6FTSE 5,376.41 -34.11 -0.6

Hang Seng 21,473.60 -327.99 -1.5

Jakarta Composite 3,057.16 -25.44 -0.8Nikkei 225 9,551.05 -21.44 -0.2

Seoul Composite 1,781.13 -9.04 -0.5Shanghai Composite 2,595.27 -77.26 -2.9SET 862.61 -12.57 -1.4

Straits Times 2,984.29 -10.77 -0.4

Taiwan Weighted 7,976.74 -57.75 -0.7

India Sensex 18,219.99 -67.51 -0.4Major Commodities

NYMEX Crude Oil(US$/barrel) 80.25 -1.23 -1.5

MDEX CPO – ThirdMonth (RM/metric ton) 2,670.00 -60.00 -2.2

US Inte rest Rate Current Last Updated

Overnight Fed Fund Rate 0-0.25% Unch10 Aug2010

Next FOMC meeting 21 Sep 2010

Table 1 : Daily Statistics

Scoreboard 4 Aug 5 Aug 6 Aug 9 Aug 10 Aug

Gainers 322 362 328 293 255Losers 363 349 367 402 409Unchanged 286 276 281 256 281

Untraded 399 378 390 416 421

Market Cap

Turnover(mln shares) 811 994 866 699 676

Value (RMmln) 1,188 1,576 1,256 1,066 1,133

Currency

MYR vs US

Dollar 3.1660 3.1540 3.1460 3.1405 3.1495



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♦ The local futures index bowed to fresh selling pressure yesterday, as the sharp pullback in the overseas markets

prompted traders to lock in profit from the recent rallies.

♦ Despite the overnight gains in the US markets, the FKLI tracked the steep correction in China markets yesterday.

♦ For the day, the FKLI for Aug contract tumbled 9.50 pts or 0.70% to 1,356.00, near the day’s low of 1,355.50.

♦ Chart wise, it overturned the previous “bullish engulfing” candle with a huge “bearish engulfing” candle.

♦ More critically, this has led to a clear breakdown to below the important 10-day SMA of 1,362, suggesting the

recent upbeat short-term outlook is now under threat.

♦ Compounded by the weak short-term momentum readings, we see more follow-through downside momentum in

sessions ahead.

♦ Therefore, unless the FKLI can immediately recover to above the 10-day SMA, it could risk further pullback

towards the 1,350 resistance-turn-support level soon.

♦ However, as long as the futures index sustains at above 1,350, the recent bullish technical breakout remains intact

and the technical outlook of the futures market stays positive.

♦ For now, the 10-day SMA will become the immediate resistance, followed by the recent high of 1,374.50.

Daily Trading Strategy:

♦ The plunge of the FKLI to below the 10-day SMA of 1,362 indicates a possible negative twist on the short-term

outlook.

♦ If it fails to reclaim the 10-day SMA soon, a further retreat to 1,350 looks imminent. Having said that, we will stay

positive on the recent chart breakout, until the futures index breaches 1,350.

♦ Going forward, the FKLI is projected to swing from 1,350 to 1,364 today.

Table 3: FKLI Closings

FKLI (Month)Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest

Aug 10 1365.50 1366.00 1355.50 1356.00 -9.50 1356.00 3431 18417

Sep 10 1366.50 1366.50 1356.00 1356.00 -10.00 1356.00 262 668

Dec 10 1365.50 1365.50 1357.00 1357.00 -8.50 1356.50 92 277Mar 11 1365.00 1365.00 1358.00 1358.00 -9.00 1358.00 33 138

Source: Bursa Malaysia

Chart 3: FKLI Da ily Chart 4: FKLI Intraday



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US Market Leads:

♦ Wall Street ended lower on Tuesday, as the US Federal Reserve’s bearish assessment over the economic outlook

outweighed its latest plan to purchase Treasury securities.

♦ In early session, all US major gauges slumped more than 1% on China’s weak economic data which pointed to a

possible slowdown in the 2H.

♦ Although the markets staged a powerful rebound to the positive territory after the Fed said it will use mortgage-

bond proceeds to buy more Treasuries to boost a slowing economy as well as to keep borrowing costs low, selling

returned towards the closing on worries that the economic recovery pace is slowing.

♦ Besides, the Fed also kept the current record low interest rate unchanged as expected.

♦ Dampened by China’s lower crude oil imports as well as a rebound in the greenback, the US light sweet crude oil

futures for Sep delivery dropped US$1.23 or 1.5% to end at US$80.25/barrel.


Dow Jones Industrial Average (DJIA)

♦ The US DJIA ended down by 54.50 pts or 0.51% to 10,644.25 on Tuesday, after a volatile swing from between

the 10,551.62 low and the 10,700.71 high.

♦ Despite bouncing back strongly from the day’s low, it still ended with a small negative candle. Added with the

downtick on the short-term momentum indicators, the chart is showing more weakness in the immediate term.

♦ In other words, it could pull back towards Jun’s high of 10,594.16. In our view, this level must hold to ensure the

recent bullish breakout is still valid. The next lower support is at the 21-day SMA of 10,457.

♦ On the other hand, it needs to retake the recent high of 10,719.94 to break out from the current consolidation.

Nasdaq Composite (Nasdaq)

♦ On Tuesday, the Nasdaq Composite index posted a loss of 28.52 pts or 1.24% to end at 2,277.17.

♦ On the chart, the combination of a small negative candle and the weak momentum readings point to a further

setback towards the 21-day SMA of 2,259.

♦ Importantly, it must defend the SMA in order to protect the recent uptrend. Failing to do so would trigger further

downside towards 2,190.

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



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Daily Technical Watch:

AirAsia (5099)

More profit-taking activities in the near term…

♦ The share price of AirAsia was trapped within a wide trading range from RM1.28 to RM1.45 region for most of the

time from Aug 2009 to May 2010, before a negative push that dragged it to below the RM1.28 key support level.

♦ The breakdown of the technical level forced the stock to a one-year low of RM1.07 before the reemergence of the

bargain-hunting supports.

♦ In Jun, the stock regained the key level of RM1.28, prior to the beginning of a fresh rally on its share price in Jul.

♦ Subsequently, the stock penetrated both the RM1.40 and RM1.50 resistances, and hit a multi-year high of RM1.70 in early Aug.

♦ But, as it registered with a “doji” candle at the peak of the chart and failed to sustain at above the RM1.66

important level, the stock continued to ease with its second consecutive negative candle yesterday.

♦ Coupled with the negative momentum readings, the stock could experience more profit-taking activities in the

near term, in our opinion.

♦ As such, the stock may fall towards the 10-day SMA of RM1.55 or even to the region near the RM1.50 immediate

support level in the near term, should the selling continue.

♦ Having said that, the stock’s short-term uptrend remains intact as long as it sustains at above the RM1.50 level.

Technical Readings:

♦ 10-day SMA: RM1.554

♦ 40-day SMA: RM1.388

♦ Support: IS = RM1.50 S1 = RM1.40 S2 = RM1.28

♦ Resistance: IR = RM1.66 R1 = RM1.80 R2 = RM1.90

Chart 7: AirAsia Daily Chart 8: AirAsia In traday

Market Technical Reading : Sentiment Turning Cautious… - 11/08/2010

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