Market Technical Reading - Sustaining At Above The 10-day SMA Key To Positive Short-term Sentiment…- 20/07/2010

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Local Market Leads:

♦ Share prices in Bursa Malaysia closed lower on Monday, tracking losses in key regional markets as investors

turned cautious following a sudden plunge in the US markets late Friday, due to the poor Consumer Confidence

Index in July preliminary reading.

♦ However, trading sentiment in the local bourse recovered slightly in the afternoon session, as bargain hunters

moved back to scoop up bargain stocks.

♦ The lower liners like TimeCom (+4.5sen), Scomi (+1.5sen) and UEMLand (+6sen) buck the general downtrend as

they attracted strong buying interests on speculative interests. Smaller property stocks, like L&G (4sen) and

Tebrau (+3.5sen) gained as buying activities spilled over as trading activities improved in late trading.

♦ Amongst the regional markets, the HSI and FTSTI closed 0.8% and 0.4% lower, while SHComp eked out with a

gain of 2% yesterday.

♦ Turnover continued to improve with 849m shares changing hands compared to 794m shares on last Friday. Marketbreadth was mixed, as gainers marginally outnumbered losers by 327 to 324.

Technical Interpretations:

♦ As a result, the FBM KLCI closed 3.3pts lower or 0.25% to 1,333.35. It registered a small “hammer-like” candle,

indicating a possible recovery in trading sentiment today.

♦ Technically, as the index was supported near the 10-day SMA of 1,326, with a day low at 1,327.98 yesterday, a

sustained buying support could lift the index higher towards the recent high of 1,341.96 soon.

♦ However, as both the momentum indicators are still heading downward, its recovery momentum might still be

shallow.

♦ On the upside, a tough technical resistance is still firm at 1,350. Without removing this hurdle, the medium-term

outlook of the FBM KLCI will remain uncertain, in our view.

Chart 1: FBM KLCI Da ily Chart 2: FBM KLCI I ntraday

Techn ica l Research

D a i l y T r a d i ng S t r a t egy

Market Technical ReadingSustaining At Above The 10-day SMA Key To Positive Short-termSentiment…

M a l a s i a

M A R K

E T

D A T E L I N E

P P

7 7 6 7 / 0 9 / 2 0 1 0 ( 0 2 5 3 5 4 )

RHB ResearchInstitute Sdn BhdA member of theRHB Banking GroupCompany No: 233327 -M

20 July 2010

Please read important disclosures at the end of this report.



20 July 2010


Daily Trading Strategy:

♦ Encouragingly, the FBM KLCI managed to survive yesterday’s fall, due to external volatilities i.e. the sudden

plunge in the US markets on Friday, at above the key short-term support of the 10-day SMA near 1,326.

♦ Closed with a “hammer-like” candle, though the candle size is small, the FBM KLCI may still recover if buying

momentum continues today, given the improved daily turnover to the healthy 800m – 1.0bn shares mark

yesterday.

♦ Optimistically, we expect the rotational plays centred on lower liners to continue attracting the retail participation

in the near term, hence potentially lifting the market sentiment a notch higher.

♦ On the technical perspective, the FBM KLCI will remain short-term positive as long as it sustains at above the 10-

day SMA. A medium-term support is seen near the psychological level of 1,300, closer to the 40-day SMA of 1,306.

♦ Having said that, the broader market sentiment will still be influenced by the key US and regional markets’

performance in the near term, in our opinion.

Source: RHBInvest & Bloomberg

Table 2 : Major Indices & Commodities

Local Key Indices ClosingChange

(Pts)

Change

(% )FBM KLCI 1,333.35 -3.30 -0.2FBM 100 8,792.49 -14.84 -0.2

FBM ACE 3,743.41 -21.20 -0.6

Major Overseas

Indices

Dow Jones 10,154.43 56.53 0.6Nasdaq 2,198.23 19.18 0.9

S&P 500 1,071.25 6.37 0.6FTSE 5,148.28 -10.57 -0.2

Hang Seng 20,090.95 -159.21 -0.8

Jakarta Composite 2,975.57 -16.88 -0.6

Nikkei 225 9,408.36 Closed ClosedSeoul Composite 1,731.95 -6.50 -0.4Shanghai Composite 2,475.42 51.15 2.1

SET 830.4 2.86 0.3FT Straits Times 2,945.42 -12.30 -0.4

Taiwan Weighted 7,649.83 -14.74 -0.2India Sensex 17,928.42 -27.40 -0.2

Major Commodities

NYMEX Crude Oil

(US$/barrel) 76.54 0.53 0.7MDEX CPO – ThirdMonth (RM/metric ton) 2,454.00 5.00 0.2US Inte rest Rate Current Last Updated

Overnight Fed Fund Rate 0-0.25% Unch22-23 Jun

2010Next FOMC meeting 10 Aug 2010

Table 1 : Daily Statistics

Scoreboard 13 Jul 14 Jul 15 Jul 16 Jul 19 Jul

Gainers 363 506 242 476 327

Losers 284 194 390 206 324

Unchanged 289 269 289 263 269Untraded 428 395 443 424 444

Market Cap

Turnover

(mln shares) 574 802 620 794 849Value (RM

mln) 1,085 1,538 1,128 1,196 1,331

Currency

MYR vs USDollar 3.2055 3.1955 3.1975 3.2065 3.2240



20 July 2010



♦ Even though the local futures market opened yesterday’s trading weaker due to last Friday’s sharp drop on the US

major indices, the FKLI managed to recover steadily to close at the day’s high.

♦ The FKLI for Jul contract touched an intraday low of 1,331, but closed at a high of 1,340, losing merely 0.5pts or

0.04% for the day. On the chart, it recorded a positive candle, its second of the same kind in two trading days.

♦ Moreover, the futures index’s recovery was clearly seen as a technical rebound after traded too close to the

supportive 10-day SMA near 1,328.95.

♦ Technically, as it is still trading at above the 10-day SMA, its short-term trading sentiment is still positively biased,

in our view.

♦ Although the stochastic oscillators are pointing downward following its recent “sell” signal, the 14-day RSI seems

to be stabilising in recent sessions. This points to a reduction in selling momentum.

♦ As long as the FKLI still trades at above the 10-day SMA, we do not discount the possibility of buying resumption

to revisit the recent high of 1,347.50 soon.

♦ Note that if the FKLI penetrates above 1,347.50 and the May’s high of 1,352.50, its medium-term outlook will turn

even more bullish on the chart. The next resistance level is at 1,390.

♦ Meanwhile the medium-term supports are near the 40-day SMA of 1,307 and the 1,300 psychological level.

Daily Trading Strategy:

♦ Yesterday’s rebound indicates a likelihood of a resumption of buying activities soon.

♦ As such, traders should prepare to go “long” again should it sustain at above the 10-day SMA.

♦ Exit plan will only be executed if it loses the 10-day SMA.

♦ For today, the FKLI should trade within 1,336 to 1,348.

Table 3: FKLI Closings

FKLI (Month)Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest

Jul 10 1333.00 1340.00 1331.00 1340.00 -0.50 1340.00 5102 18143

Aug 10 1331.00 1339.00 1331.00 1339.00 -1.00 1339.00 331 943

Sep 10 1331.00 1339.00 1330.00 1338.00 -1.00 1338.50 114 507Dec 10 1330.00 1336.00 1330.00 1336.00 -2.50 1337.50 34 262

Source: Bursa Malaysia

Chart 3: FKLI Da ily Chart 4: FKLI Intraday



20 July 2010


US Market Leads:

♦ US stocks recovered slightly on Monday, as some upbeat earnings news offset a decline in US home builders’

confidence index.

♦ Initially, the US markets came under mild selling pressure following a news report that the National Association of

Home Builders' confidence index dropped to 14 in Jul from Jun’s 16, hitting its lowest level since Apr 2009.

♦ However, confidence improved gradually after oilfield service company Halliburton (+6.0%) announced a set of

better-than-expected earnings. Boeing rose 2.1% after securing a 30-airplanes order, while Microsoft advanced

1.4% on the UBS earnings upgrade.

♦ On the crude oil market, the US light sweet crude oil futures for August delivery bounced back from the recent

selloff, gaining 53cents or 0.7% to US$76.54/barrel.

♦ After the close, the share price of IBM and Texas Instrument ended lower after both companies’ revenues missed

market expectations.


Dow Jones Industrial Average (DJIA)

♦ After last Friday’s plunge, the US DJIA staged a mild recovery and closed up by 56.53 pts or 0.56% to 10,154.43.

♦ As it recaptured the major technical support of 10,150 and the 21-day SMA of 10,119 with a small positive

candle, this suggests a potential reversal from the recent sell mode.

♦ But to dismiss the recent correction threat, it needs to stablise at least at above 10,150 and the 21-day SMA.

♦ If not, further retracement towards the 10,000 psychological level and 9,700 is still possible. Strong immediate

hurdle remains at the recent high of 10,407.82.

Nasdaq Composite (Nasdaq)

♦ The Nasdaq Composite index also staged a timely recovery to above its crucial supports of 2,190 and the 21-day

SMA near 2,197. For the day, it was up 19.18 pts or 0.88% to 2,198.23.

♦ Ended with a “positive harami” candle, further downside risk has reduced for the time being.

♦ Still, further rebound is still required to avoid any fresh resumption of selling activities that could lead to a losing

of 2,190, towards the lower support at 2,100.

Chart 5: US Dow Jones I ndustrial Average (DJI A) Daily Chart 6: US Nasdaq Composite DailyChart 5: US Dow Jones I ndustrial Average (DJI A) Daily Chart 6: US Nasdaq Composite Daily



20 July 2010


Daily Technical Watch:

Land & General (3174)

Surpassing RM0.50 w ill accelerate its upward momentum towards RM0.56…

♦ The share price of L&G staged a steep rally in early Jan 2010, from below the support level of RM0.36, surpassing

few key resistance levels before touching a high of RM0.64 in mid-Jan.

♦ However, upon hitting the resistance level at RM0.635, the stock encountered constant profit-taking pressure,

and trimmed its gains progressively to a low of RM0.365 in May 2010.

♦ Thereafter, the stock began to stabilise and formed a base at below the RM0.425 level.

♦ The stock kicked off another round of steep rally since last Friday, chalking up two huge bullish candles on thechart and closed yesterday firmly at RM0.495.

♦ On the momentum, both the stochastic oscillators and the 14-day RSI have reached the “overbought” region, but

there is still room for further upside push unless the indicators start to hook downward.

♦ Moreover, as the 10-day SMA began to move higher from the 40-day SMA, its medium-term outlook has turned

slightly more positive.

♦ Overhead resistance is at the RM0.50 level.

♦ If it manages to surpass this hurdle, its upside momentum will accelerate. This will lead to another run-up

towards the RM0.56 level, before rechallenging the RM0.635 tough resistance level again.

♦ Nevertheless, short-term investors should be aware that failure to crossover the RM0.50 level will lure back

sellers, hence triggering a sharp profit-taking leg on the recent rallies. Support is seen at RM0.425.

Technical Readings:

♦ 10-day SMA: RM0.4145

♦ 40-day SMA: RM0.3996

♦ Support: IS = RM0.425 S1 = RM0.36 S2 = RM0.28

♦ Resistance: IR = RM0.50 R1 = RM0.56 R2 = RM0.635

Chart 7: L&G Daily Chart 8: L&G In traday



20 July 2010


IMP ORTANT DI SCLOSURES

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. Theopinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ orbe 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 beconstrued as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in anymanner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated personsmay 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 objectivesof persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluateparticular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment orstrategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents acceptsany liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providinginvestment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHBGroup may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equitysecurities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or otherservices from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

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 reflectinformation known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation basedupon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

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 recommendedsecurities, 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 theactions of third parties in this respect.

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Market Technical Reading - Sustaining At Above The 10-day SMA Key To Positive Short-term Sentiment…- 20/07/2010