Market Outlook as at 6 July 2020

Last week, FBMKLCI rallied and re-established its position just above its previously violated uptrend line, SS. The recovery was fairly broad-based though the big gainers were concentrated in the glove stocks and the technology stocks.

Chart 1: FBMKLCI's daily chart as at July 3, 2020 (Source: Malaysiastock.biz)

The rally among the glove stocks, which is part of the health care sector, helped to push the health care index to a new high.

 Chart 2: BM Health Care index's daily chart as at July 3, 2020 (Source: Malaysiastock.biz)

Similarly, the rally in the tech stocks has pushed the Technology index to a new high in the current rally! At a close of 43020, Technology index is not far from its all-time high of 44610 recorded in January 2018.


Chart 3: BM Technology's daily chart as at July 3, 2020 (Source: Malaysiastock.biz)

The rally in tech stocks had earlier shown its potential when it helped FBMACE to make a new high in the current rally (see Chart). If you looked at the monthly chart (Chart 5), you will see that FBMACE has just surpassed the line connecting the high recorded its April 2015 & January 2018. This could mean that FBMACE may continue to trend higher. However, we should be careful to avoid a bull trap since the FBMACE stocks have rallied substantially over the past 4 months after it came off a deep selldown in March which was a bear trap.


Chart 4: FBMACE's daily chart as at July 3, 2020 (Source: Malaysiastock.biz)

Chart 5: FBMACE's monthly chart as at July 3, 2020 (Source: Malaysiastock.biz)

In the current market, where winners keep getting pricier and non-performers remain dull (if not down), it is hard to recommend stocks with strong conviction. If the market is too confusing for you, then you should stick to cash or those stocks that you are comfortable investing in. Just tell yourself, you have good companies if you are sitting on cash or staying on the sideline (here and here).