A lot of players in the market have the perception that the sell down yesterday was caused by the technical failure faced by Bursa in the first half to update the FBMKLCI index point. However, in our opinion, no matter what, this is the fact and we need to accept that the FKLI already convincingly broke the 1320 downside support level and the band that we have been looking at thus far.
For us, we will revise our positive view towards the near term market to cautious and is ready to revise our call further to negative call if today market still not manage to recover from yesterday sharp dropped. However, we are now more bias towards negative outlook for the reasons below:-
1) We have been reiterating about the 1320 – 1350 band nearly a month and in our view, this level is considered being taken out convincingly and this will trigger more selling in the market.
2) Since mid of last month, we have been maintaining our call that the uptrend is remained intact at least until the end of this month/ before the world cup. However, as per today, we have only about a week to go, this will not attract fresh investors to accumulate shares at the moment.
3) This is the first time our market followed in tandem the sharp decline in the world indices and the decoupling phase that we are enjoying for the past three weeks has ended yesterday – this also represent the technical outlook will be the important reference rather than the fundamental from now onwards.
4) This is the sharpest decline that we are having for this year and with the Bollinger upper and lower band have started to widen, the overall technical outlook remained very weak with the immediate support is seen at the MA 100 level of 1303 level.
No matter what, yesterday broke through the trading band of 1320 will incur more trading opportunity with clear direction expected in the near term, rather than we are being trapped in the tight range trading and boring trading session.
Investors need to get ready that this round of retracement may be the beginning of the major correction. Any rebound today should serve as an opportunity for those who has long the market to cut their position. Support for today is seen at 1300 – 1296 levels and the resistance is seen at 1315 level.
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