Wednesday, July 20, 2011

Market Outlook as at July 20, 2011

I have attached below three charts (FBMFLG, FBMScap & FBM-KLCI) in the order of the weakest to the strongest. On all three charts, I have plotted two vertical lines- one for Dec 21, 2007 & another for Mar 21, 2008. During that interval, we saw all three indices chalked up the following:
1) the 10-week SMA line crossed below the 20-week SMA line; and
2) the index subsequently went below the 40-week SMA line.

You will notice that these two events happened earlier for the weakest index (FBMFLG) as compared to the strongest index (FBM-KLCI). In addition, you would notice that all indices would struggle to hang on to the 40-week SMA line after the 10-week SMA line had crossed below the 20-week SMA line.

If we look at all three indices today, we would see that the 10-week SMA line had crossed below the 20-week SMA line for both FBMFLG & FBMSCap, while the 10-week SMA line is still above the 20-week SMA line for FBM-KLCI. Now, both FBMFLG & FBMSCap are struggling to stay above their respective 40-week SMA line. Finally, you would notice that the indicators are all pointing downward. MACD is very near to the zero line. As for the ADX indicator, the -DMI is hooking up while +DMI is dropping fast.

All in all, the technical outlook for the market is poor. While we do not have a confirmed SELL signal, we should take precautionary steps to adjust your exposure to the equity market.




Chart: FBMFLG, FBMSCap & FBM-KLCI's weekly charts as at July 20, 2011_11.30am (Source: Quickcharts)
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3 comments:

  1. kerry leeWednesday, July 20, 2011 3:24:00 PM

    Dear Alex,

    It appears that Coastal is moving up again after its heavy free fall since ex-bonus (from RM2.71 to RM2.38). It is now RM2.47. Do you think it is time to buy? I read that the conversion for its free warrant is RM3.18. Could this be the cause of the recent fall?

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  2. Alex LuThursday, July 21, 2011 3:38:00 PM

    Hi kerry lee

    Coastal could be a buy on fundamental reason (see my earlier post). Technically, it looks like a SELL. It has however rebounded after testing its medium-term uptrend line at RM2.35. This rebound could send the stock to RM2.58-2.60 or even to RM2.70-2.73. If it can surpass the latter, the stock could continue with its prior uptrend.

    To answer your question whether it's buy or not, I think it could be a trading BUY at about RM2.35-2.45 & a SELL if it reaches RM2.65-2.75.

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  3. kerry leeThursday, July 21, 2011 4:40:00 PM

    Dear Alex,

    Thank you for the reply.

    What do you think of the following counters viz:-
    1) SOP
    2) Kulim
    3) TDM

    They are plantation based counters and trading relatively low. Am looking on long term buy.

    ReplyDelete