FKLI & FCPO : 18 July 2012

FKLI: Uptrend Continues

FKLI’s rally continues as the index printed another all-time high yesterday, ending the deadlock of the prior four days. This cancels the negative bias of 12 July’s black candle. The index is still comfortably above both the 50-day MAV line and the rising 200-day MAV line, supported by the longer-term positive “Golden Cross” that emerged in February. The near overbought level of the daily RSI has not dampened buying momentum, too.

Thus, yesterday’s firm buying conviction should lead the index higher. A firm upward bias should not see it trading below Monday’s low of 1,630 pts. The next resistance level is the psychological 1,650 pts and further selling can then be reasonably expected at every 10-pt interval. A close below 1,630 pts, however, could be disastrous for the uptrend. This indicates the return of selling pressure, in reaction to the near overbought daily RSI. A close below 13 July’s low of 1,623 pts should confirm the weakness, leading to a correction of the two-month rebound. Supports are at 9 July’s low of a 1,614 pts and 5 July’s low of 1,610 pts. Stronger support remains just above the 1,600-pt psychological level, at the two-week low of 1,602.50 pts.

FCPO: Another Turnabout

The commodity’s volatile trade of the past few days continues. As mentioned yesterday, a break of RM3,100 indicated a return of selling, which exactly happened. It covered the gap created on Monday and pushed the commodity back below the 50-day MAV line too. The commodity is also below the 200-day MAV lines, reinforced by the longer-term negative indication of the “Death Cross” that also emerged three weeks ago. This extends the selling that started from 6 July’s black candle. However, it has yet to signal an end to the rebound that started in mid-June as the higher low was made last week, as the RM3,000 support level was not violated.

The latest candle suggests that the commodity will decline further today. A continued close below the 76% retracement of the late May-early June decline and 38% of the Apr-June decline at RM3,100, or preferably below the 12 July gap high of RM3,080 should keep the selling pressure intact. Further supports are at RM3,050, which kept price low in late June. A close below RM2,992, which withstood multiple tests two weeks back, is required to confirm the downward bias. Further support is at RM2,970, the gap low of 22 June and also the 62% retracement of the recent month-long rally. The broken RM3,100 has now become the resistance. This is followed by RM3,150, where the 200-day MAV line currently lies and a break above RM3,200 is needed to keep that month-long rebound going. That should end the series of lower highs, recently registered at RM3,193 and RM3,182.

Source: OSK