FKLI & FCPO : 19 July 2012

FKLI: Uptrend Continues

FKLI’s two-month rally continues as expected, as the index printed another all-time high yesterday. The index is 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. Note, too, that the near-overbought level of the daily RSI has not dampened buying momentum.

Thus, the current upward bias 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 negative for the uptrend. This likely indicates profit taking, 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 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: June Rebound Likely Over

The selling that returned on Tuesday continues and selling pressure was marked by the “Long Black Day” that closed below the RM3,000 psychological level. The commodity even closed below last week’s low and cancelled the positive bias of the full-bodied white of 13 July. It stays below the 50-day and 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.

The latest candle suggests that the commodity will decline further today. Another close below RM3,000 likely signals the end of the rebound that started in mid-June, and will see the commodity moving back in the direction of the prior downtrend as suggested by the latest lower highs at RM3,193 and RM3,182. Further support is at RM2,970, the gap low of 22 June and also the 62% retracement of the recent month-long rally, and followed by RM2,940 and the gap of 19 June at RM2,900. Resistance is now at RM3,050, which kept prices low in late June, and then at RM3,100, the 76% retracement of the late May-early June decline and 38% of the Apr-June decline. Given the sharp decline, only a close back above RM3,100 can buying be taken seriously.

Source: OSK