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RHB Research

Technical Research Institute Sdn Bhd
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Company No: 233327 -M

Dail y Trad ing St rat eg y

MARKET DATELINE 25 October 2010
Market Technical Reading
Short-term Outlook Remains Positive...

Chart 1: FBM KLCI Daily Chart 2: FBM KLCI Intraday

Local Market Leads:

♦ In the absence of positive trading catalysts, the FBM KLCI finished almost unchanged on Friday as investors turned
cautious and opted to lock in profits ahead of the weekend.

♦ Though Asian investors generally remained optimistic on the near-term corporate earnings announcement,
regional markets ended mixed on cautious trading ahead of the weekend’s Group of 20 (G20) finance ministers
meeting in South Korea. Hang Seng fell by 0.56%, but KOSPI and Nikkei 225 ended up by 1.21% and 0.54%

♦ The early weakness in the European markets further dampened sentiment and caused the FBM KLCI to close near
the low to 1,490.64, losing 0.38 pt for the day.

♦ Nevertheless, the overall trading activities remained robust, with strong rotational play on selective sectors,
namely plantation, property and construction.

♦ Daily volume eased to 1.23bn shares from Thursday’s 1.43bn shares. Market breadth stayed positive with 388
advancers outweighing 370 decliners.

Technical Interpretations:

♦ Though the FBM KLCI managed to hit a day high of 1,496.48, it registered a negative candle for the day on
sustained profit-taking pressure.

♦ The negative candle suggests more follow-through selling activities likely in the immediate term.

♦ However, as the close was still above the supportive 10-day SMA of 1,489, we are of the view that the weakness
on the index could be limited.

♦ And as long as the SMA remains supportive, the FBM KLCI will still see a good chance to rechallenge the recent
high of 1,503.82 soon, before surging further towards the historical high at 1,524.69.

♦ Besides the 10-day SMA, additional support can be seen at a technical gap near 1,472.32 - 1,476.05.

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Daily Trading Strategy:

♦ Last Friday’s negative candle confirmed the previous day’s “star” candle and suggests that the FBM KLCI may risk
more profit-taking activities in the immediate term.

♦ However, immediate weakness could be limited given the firm immediate support level near the 10-day SMA of
1,489. In fact, investors should view this as an opportunity to collect value stocks for a further positive push ahead.

♦ And as we reiteraited, as long as the benchmark index trades and stablises near the SMA, the short-term outlook
remains optimistic and the FBM KLCI is expected to retest the 1,500 psychological level and the recent high of
1,503.82 soon.

♦ Beyond that, sentiment will turn even more bullish and it will lift the index towards the all-time high of 1,524.69

♦ For a longer-term view, the index is well supported by the support near a technical gap of 1,472 - 1,476, followed
by the 1,450 and the 40-day SMA of 1,462.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 18 Oct 19 Oct 20 Oct 21 Oct 22 Oct Local Key Indices Closing
(Pts) (%)
Gainers 299 438 385 459 388 FBM KLCI 1,490.64 -0.38 0.0
Losers 468 369 408 301 370 FBM 100 9,842.62 9.27 0.1
Unchanged 298 276 293 316 297 FBM ACE 4,259.31 -32.93 -0.8
Untraded 306 288 286 296 319 Major Overseas
Market Cap Dow Jones 11,132.56 -14.01 -0.1
Turnover Nasdaq 2,479.39 19.72 0.8
(mln shares) 1,331 1,500 1,489 1,429 1,226 S&P 500 1,183.08 2.82 0.2
Value FTSE 5,741.37 -16.49 -0.3
(RM mln) 1,610 1,820 1,803 1,848 1,597 Hang Seng 23,517.54 -131.94 -0.6
Jakarta Composite 3,597.75 9.74 0.3
Currency Nikkei 225 9,426.71 50.23 0.5
MYR vs US Seoul Composite 1,897.31 22.62 1.2
Dollar 3.1005 3.1070 3.1165 3.1045 3.1115 Shanghai Composite 2,975.04 -8.49 -0.3
SET 992.24 3.44 0.3
Source: RHBInvest & Bloomberg Straits Times 3,173.57 10.04 0.3
Taiwan Weighted 8,168.06 36.83 0.5
India Sensex 20,165.86 -94.72 -0.5
Major Commodities
NYMEX Crude Oil
(US$/barrel) 81.69 1.13 1.4
FCPO – Third Month
(RM/metric ton) 3,005.00 15.00 0.5
US Interest Rate Current Last Updated
21 Sep
Overnight Fed Fund Rate 0-0.25% Unch
Next FOMC meeting 2-3 Nov 2010

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Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ Taking cues from mixed sentiment in the key Asian markets and the poorer opening in the European markets, the
FKLI gave up its early gains by ending down in quiet trading on Friday.

♦ Earlier in the day, the FKLI opened 2 pts higher at 1,497.0, near its intraday high of 1,498.0 in response to a
further rebound in the overnight US markets, but it later surrendered most of its gains in the afternoon session.

♦ For the day, the FKLI for Oct contract closed down 4.50 pts or 0.30% to 1,490.50.

♦ On the chart, the FKLI recorded a negative candle to signal a weaker day ahead.

♦ However, as it still trades at above the supportive 10-day SMA of 1,488, any negative impact could be limited in
the immediate term, in our view.

♦ And, should the SMA successfully trigger a technical rebound, the FKLI will turn back onto its recovery track to
retest the recent high of 1,501.00 soon.

♦ Upon removal of 1,501.00, we expect the aggressive traders to return to lift the FKLI to the all-time high level of

♦ For now, its immediate support is pegged at the 10-day SMA, followed by the medium-term supports at the 40-
day SMA of 1,462 and the crucial pivotal point at 1,450.

Daily Trading Strategy:

♦ Despite last Friday’s negative candle suggesting a further retreat today, we expect the 10-day SMA of 1,488 to cap
its immediate downside pressure.

♦ And if the 10-day SMA can trigger a technical rebound, it will retest the recent high of 1,501 soon.

♦ We expect the FKLI to fluctuate at between 1,486 and 1,501 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Oct 10 1497.00 1498.00 1487.50 1490.50 -4.50 1490.50 2907 19645
Nov 10 1498.00 1498.00 1488.00 1490.00 -5.00 1490.00 532 1090
Dec 10 1496.50 1497.50 1488.00 1488.00 -7.00 1490.00 63 377
Mar 11 1494.00 1494.00 1488.00 1488.00 -7.50 1490.00 11 112

Source: Bursa Malaysia

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Chart 5: US Dow Jones Industrial Average (DJIA) Daily Chart 6: US Nasdaq Composite Daily

US Market Leads:

♦ Most US stocks closed higher on Friday in response to another set of impressive quarterly earnings from the
major corporates.

♦ The latest earnings that beat the market expectations included Baidu (+4.6%), (+2.5%) and
Schlumberger (+5.4%).

♦ But the benchmark Dow was dragged down by American Express (-3.1%) and Verizon Communications (-1.3%).
Though both companies reported better-than-expected profits, the former fell on concerns of weak demand for
new loans going forward, while the latter was hit by disappointment over slowing wireless subscribers growth.

♦ On the NYMEX, the US light sweet crude oil futures for Dec delivery staged a rebound by rising US$1.13 or 1.4%
to US$81.69/barrel.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ In the absence of follow-through buying support, the DJIA eased by 14.01 pts or 0.13% to 11,132.56 in quiet
trading session on Friday.

♦ Chart wise, the small “negative” candle indicates the index may see more profit-taking activites in the near term.

♦ The Dow could ease further towards the immediate support levels at 11,000 and the 21-day SMA of 10,969 soon.

♦ Nevertheless, the current uptrend should stay intact as long as the index stays at above the resistance-turn-
support level of 10,850 and the 21-day SMA in the near term.

♦ Resistances are seen near the recent high of 11,213.54, the 11,250 level and last Apr’s high of 11,258.01.

Nasdaq Composite (Nasdaq)

♦ Instead of further downside on stronger profit-taking pressure, the Nasdaq Composite index successfully removed
the 2,470 hurdle with a positive candle on Friday. It added 19.72 pts or 0.80% to end at 2,479.39.

♦ Coupled with a fresh “buy” signal on the stochastic oscillators, further rebound can be expected in the early part
of this week, in our view.

♦ In other words, once it penetrates the recent high of 2,482.14, it will confirm the current chart breakout and
propel towards Apr’s high of 2,535.28 and the next technical hurdle at 2,630 soon.

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Daily Technical Watch:

Chart 7: TSH Daily Chart 8: TSH Intraday

TSH Resources (9059)

Uptrend is likely to be maintained going forward…

♦ The share price of TSH managed to extend its recovery leg when it finally removed the key resistance level at
RM1.80 in Dec 2009 on the support of the uptrend on the 10-day SMA.

♦ The acceleration of buying momentum pushed the stock to a high of RM2.35 in Jan 2010, but as it failed to
sustain at above the RM2.17 level, it fell into a downswing.

♦ Though the downswing overshot on the downside, the stock managed to find support near the resistance-turn-
support level at RM1.80 in May.

♦ Slowly, the stock regenerated its upward momentum and kicked off another round of uptrend in recent months.

♦ It recaptured the RM2.17 level recently and closed last Friday at a high of RM2.39, successfully surpassing the
previous high of RM2.35 hit in Jan 2010.

♦ Last Friday’s bullish candle confirmed the recent breakout from the RM2.17 level and suggests a follow-through
buying momentum likely for this week.

♦ Next resistance is seen at RM2.58. If it manages to surpass this level, it will propel into a higher trading zone
from RM2.58 to RM3.00 in the near term.

♦ For now, so long as it can sustain at above the RM2.17 level, its uptrend and the breakout momentum are likely
to be sustained going forward, in our opinion.

Technical Readings:

♦ 10-day SMA: RM2.295

♦ 40-day SMA: RM2.113

♦ Support: IS = RM2.17 S1 = RM1.99 S2 = RM1.80

♦ Resistance: IR = RM2.58 R1 = RM3.00 R2 = RM3.36

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This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
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may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
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This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
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The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
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Technical recommendation framework for stocks and sectors are as follows: -

Technical Recommendation:
Trading Buy = Short-term positive opportunity spotted. It is an aggressive trading recommendation with a book to sellers’ price for short-term technical upside.
Bargain Buy = Short-term positive but technical signals have yet to trigger a rally. Traders can park and queue for their desired entry level within a small range.
Buy on Weakness = Short- to Medium-term positiveness anticipated, but technical readings are still negative. Traders can pick-up the stock for future rally.
Sell on Strength = Short-term momentum still positive, Traders are advice to lock in profit base on current strength.
Take Profit = Short-term target achieved. Traders are advice to exit before the technical readings turn bearish.
Avoid = Risky situation in the short-term and high volatility expected on the share price. Traders’ best strategy is staying away until it stabilises.

Technical Time Frame:

Immediate-term = short time frame within a contra period.
Short-term = moderate time frame within two to three contra periods. For tracking purposes, we refer to 10 trading days.
Medium-term = medium time frame usually refers to two to three weeks period. For tracking purposes, we refer to 20 trading days.

Technical recommendations are generally short-term in nature and may differ from RHBRI’s equity fundamental view and recommendation on the same company.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

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