Market Outlook as at March 5, 2012

Over the past few days, the global equity markets went on a tear. Our FBMKLCI was no exception when it broke above the horizontal resistance at 1565-1566 on February 29 & hit an intra-day high of 1594 today- 3 point shy of the all-time intra-day high of 1597 recorded on July 11, 2011. See Chart 1 below.

After the sharp rally over the past few days & the failure to surpass the all-time high today, our market is likely to enter into a short correction over the next few days.You may use this correction to gain entry into the market.


Chart 1: FBMKLCI's daily chart as at March 2, 2012 (Source: Tradesignum)

As the FBMKLCI approaches the all-time high, we can expect the same for many of the sector indices. A quick look at the major sectors revealed the following:

- Consumer Products has been making new high ever since it surpassed the previous all-time high in December last year;
- Industrial Products, Plantation and Trading Services are at or near their respective all-time high; and
- Finance, Construction & Properties have not come near the all-time high but they have broken above their respective downtrend line.

Of these three laggard sectors, finance sector may be the first to test its all-time high. From Chart 2 below, we can see that Finance index has just broken to the upside of the wedge formation at 14100. It could rally to test its immediate resistance is at 14500 & then the psychological 15000 mark.


Chart 2: Finance's weekly chart as at March 2, 2012 (Source: Quickcharts)

The properties index broke above its intermediate downtrend line at 1040 in early February. It nearly tested its horizontal resistance at 1070 before it entered into a correction. This brought the index down to its medium-term uptrend line support at 1032. Today, it tested the horizontal resistance of 1070 but it failed to stay above it. An upside breakout above this horizontal resistance could send the index to the next horizontal resistance at 1130 & then the psychological 1150 mark.


Chart 3: Properties's weekly chart as at March 2, 2012 (Source: Quickcharts)

Finally, the construction sector corrected back to its medium-term uptrend line support at 260. It has earlier broken above its intermediate downtrend line resistance at 264 in early February. Can it recruit enough support to continue its upleg?


Chart 4: Construction's weekly chart as at March 2, 2012 (Source: Quickcharts)

If you are looking at some laggards to play catch-up, you can consider these three sectors. My personal preference is for the finance & construction sectors. Some finance stocks to consider are AMMB, CIMB, RHBCap & Maybank, and some construction stocks to look at are MMC, Gamuda, WCT & IJM.