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PP 7767/09/2010(025354)

RHB Research
Malaysia Technical Research Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

Da ily T rad ing S trat egy

14 July 2010

Market Technical Reading

Sentiment To Improve On The Revival Of Rotational Interests...

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

Local Market Leads:

♦ The local market continued its bullish uptrend for the sixth day in a row on Tuesday.

♦ Added with another rally in the local futures market, the FBM KLCI settled higher by 6.13 pts or 0.46% to
1,332.87 yesterday.

♦ The local market traded steadily even after most of the regional markets turned lower on profit-taking dips, in
reaction to a sharp fall in China’s markets.

♦ SHComp slid 1.62% after China said it would maintain its “strict enforcement” behavior towards its housing
policies to prevent speculative buying in property industry. This dashed the earlier hopes of possible easing in
property tightening measures.

♦ Still, the European markets opened firmer on better-than-expected quarterly earnings from the US Alcoa overnight.
This outweighed news that Moody’s Investors Services had downgraded Portugal’s sovereign ratings to A1.

♦ Trading interest in the local bourse remained uninspiring with volume slowing to 574m shares from 611m shares a
day earlier. Market breadth stayed positive though, with 363 counters up overwhelming 284 counters down.

Technical Interpretations:

♦ Instead of taking a breather, the FBM KLCI edged higher in a tight range at between 1,328.71 (+1.97 pts) and
1,332.87 (+6.13 pts) yesterday.

♦ On the chart, it ended with a positive candle, overruling the previous negative “shooting star” candle.

♦ Aided by the continuous upbeat momentum readings, the benchmark is well underway to remove June’s high of
1,335.31 soon, in our takes.

♦ Still, more breakthroughs on the chart are needed, to spark further buying support on the FBM KLCI towards the
major resistance barrier of 1,350. Further clearance of 1,350 will boost its medium-term outlook going forward.
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Daily Trading Strategy:

♦ The FBM KLCI appeared more resilient than we had expected yesterday, in the wake of mild selling activities in the
regional bourses.

♦ In fact, based on six consecutive positive candles in the last six trading days, the benchmark stands a good chance
to take out the June’s 1,335.31 high, if the buying support persists today.

♦ While the development on the daily turnover remains disappointing, we believe trading interests should improve
slowly amid a revival of rotational trading activities amongst the lower liners of late.

♦ Accordingly, we expect trading volume to expand when it removes 1,335.31 and the solid technical obstacle of
1,350 convincingly.

♦ Going forward, as the 10-day SMA has steadily trended upward in recent sessions, local trading sentiment should
continue to improve in tandem with the increase in positive news flow from the US’ quarterly earnings report in
the near term.

♦ Strong supports remain near the 10-day SMA (1,315), 40-day SMA (1,303) and the psychological level of 1,300.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 07 Jul 08 Jul 09 Jul 12 Jul 13 Jul Local Key Indices Closing
(Pts) (%)
Gainers 275 365 405 371 363 FBM KLCI 1,332.87 6.13 0.5
Losers 307 242 238 265 284 FBM 100 8,768.62 37.40 0.4
Unchanged 272 275 276 277 289 FBM ACE 3,768.64 27.58 0.7
Untraded 506 478 444 451 428 Major Overseas
Market Cap Dow Jones 10,363.02 146.75 1.4
Turnover Nasdaq 2,242.03 43.67 2.0
(mln shares) 540 533 664 611 574 S&P 500 1,095.34 16.59 1.5
Value (RM FTSE 5,271.02 104.00 2.0
mln) 919 971 1,440 991 1,085 Hang Seng 20,431.06 -36.37 -0.2
Jakarta Composite 2,961.51 2.72 0.1
Currency Nikkei 225 9,537.23 -10.88 -0.1
MYR vs US Seoul Composite 1,735.08 1.03 0.1
Dollar 3.2185 3.2015 3.1970 3.2030 3.2055 Shanghai Composite 2,450.29 -40.43 -1.6
SET 817.35 -2.26 -0.3
Source: RHBInvest & Bloomberg FT Straits Times 2,928.70 3.38 0.1
Taiwan Weighted 7,597.42 -42.13 -0.6
India Sensex 17,985.90 48.70 0.3
Major Commodities
NYMEX Crude Oil
(US$/barrel) 77.15 2.20 2.9
MDEX CPO – Third
Month (RM/metric ton) 2,353.00 13.00 0.6
US Interest Rate Current Last Updated
22-23 Jun
Overnight Fed Fund Rate 0-0.25% Unch
Next FOMC meeting 10 Aug 2010

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Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ The KL futures market overturned the midday profit-taking pressure by ending sharply higher on Tuesday, as
buyers returned amid bullish sentiment in the European markets.

♦ Earlier, the FKLI drifted lower to the 1,324.0 low on constant profit-taking pressure, before a reversal on the
buying momentum towards the late session.

♦ At the close, the FKLI for Jul contract surged 10.50 pts or 0.79% to a nearly 3-week high at 1,339.0.

♦ Clearly, the solid closing with a positive candle has shrugged off the previous negative “shooting star-like” candle
on the chart.

♦ Plus the buoyant short-term momentum readings, a rechallenge of June’s high of 1,342 looks imminent on the
FKLI’s chart.

♦ If the futures index penetrates the 1,342 high, the current bullish momentum will accelerate towards May’s high of

♦ Its ability to remove 1,352.5 will alter the uncertainties on the medium-term outlook of the futures market, in our

♦ On the other hand, firm supports can be found near the 10-day SMA of 1,314, the 40-day SMA of 1,303 and

Daily Trading Strategy:

♦ Following yesterday’s late recovery, the FKLI is refreshing its bullish short-term outlook on the chart.

♦ Sound resistance level is seen at Jun’s high of 1,342, followed by May’s high of 1,352.5.

♦ For today, the FKLI’s trading range is likely to span from 1,333 to 1,352.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Jul 10 1333.00 1339.00 1324.00 1339.00 10.50 1339.00 7358 16872
Aug 10 1334.00 1339.00 1324.50 1339.00 11.50 1339.00 461 506
Sep 10 1333.00 1337.00 1324.00 1337.00 9.00 1337.50 213 529
Dec 10 1332.50 1337.50 1324.00 1336.00 8.00 1338.00 33 245

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:

♦ Wall Street rallied for six consecutive sessions on Tuesday, on optimism over the second-quarter earnings after
Alcoa and CSX announced a set of stronger-than-expected earnings.

♦ Alcoa, a Dow component, advanced 1.2% on its earnings results, and it also raised its forecast on global
alumimium demand. Also, railroad-operator CSX reported a 47% jump in its quarterly profit.

♦ Apart from that, market confidence strengthened further after Greece successfully sold 26-week Treasury bills at
below the ECB rate of 5%, suggesting growing confidence.

♦ With the better-than-expected corporate earnings reviving confidence on the US economy, the US light sweet
crude oil futures for August delivery rallied US$2.20 or 2.9% to US$77.15/barrel.

♦ After the closing bell, Intel announced a set of quarterly earnings and sales forecasts that beat expectation. The
chip bellwether soared more than 7% in late trading.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ As buyers accelerated buying activities, the US DJIA shot up another 146.75 pts or 1.44% to 10,363.02 on
Tuesday with a huge bullish candle.

♦ This effectively shrugged off the earlier “hangman” candle. In fact, the strong closing points to further upside
towards June’s high of 10,594.16 soon.

♦ Beyond June’s high, the chart will turn more bullish with the next heavy overhead resistance level at 10,850.

♦ Presently, strong supports are seen near 10,150 and the 21-day SMA of 10,141.

Nasdaq Composite (Nasdaq)

♦ Like the Dow, the Nasdaq Composite index also ignored the previous “star-like” candle by chalking up a bullish
candle. For the day, it rallied 43.67 pts or 1.99% to end at 2,242.03.

♦ Based on the latest removal of the 21-day SMA near 2,210, we see more upside potential in the near term.

♦ If it can expand buying support at above the SMA, this should lead it to rechallenge the next upside resistance
barrier of 2,330.

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Daily Technical Watch:

Chart 7: ScomiMr Daily Chart 8: ScomiMr Intraday

Scomi Marine (7045)

Further rally to the RM0.54 – RM0.60 congestion area if it removes RM0.50 today…

♦ The share price of ScomiMr fluctuated within RM0.50 to RM0.68 region from May to Aug 2009, before stabilising
near the RM0.54 to RM0.60 region in Sep and Oct 2009.

♦ However, the share price plunged in Nov, breaking the RM0.50 support level and headed towards a low of RM0.38
in Dec 2009.

♦ Although it has staged numerous attempts to retake the RM0.50 level, it has not yielded any positive result.

♦ As a result, the stock retreated and combed the support level at RM0.36 in May and early Jul 2010.

♦ Recently, the stock recharged with a powerful rally, soaring vertically higher to touch the high of RM0.50
yesterday, before closing the day smartly at RM0.49.

♦ On the chart, it recorded its fourth bullish candle in the last five trading days, and prompted the 10-day SMA to
cut above the 40-day SMA. The action has triggered a medium-term positive outlook on the chart.

♦ However, closing just below the key resistance level of RM0.50, the stock must push further across RM0.50, in
order to prolong this run-up.

♦ If not, the high turnover, plus the grossly “overbought” momentum will prompt short-term investors to take swift
profit, causing a steep pullback opn the share price in the near term.

♦ Positively, a removal of RM0.50 will fuel further run-up and see it stabilising near the previous congestion from
RM0.54 – RM0.60 soon. Tougher resistance level is seen at RM0.68.

Technical Readings:

♦ 10-day SMA: RM0.392

♦ 40-day SMA: RM0.3841

♦ Support: IS = RM0.36 S1 = RM0.28

♦ Resistance: IR = RM0.50 R1 = RM0.54 R2 = RM0.60

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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.

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