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The benchmark FBMKLCI finally broke above the 1,540 points resistance level last week as investors were upbeat about the Malaysian economy and another possible round of consolidation in investment banks with attention towards RHB. The index rose 11.08 points in a week to settle at 1,544.02 points. Market was bullish last week as the FBMKLCI closed near last week’s trading range high. The trading range last week was between 1532.94 and 1,550.62 points and the daily trading average was 975 million shares, slightly higher than the previous week’s average of 900 million shares.

The boost late last week may come from the recent economic news. Gross Domestic Product (GDP) forecast remains at 6% this year, according to Bank Negara despite first quarter growth of 4.6% this year. This was much lower than the first quarter GDP for 2010 which was 10.1%. The boost may have come from Prime Minister Dato’ Seri Najib Razak’s recent trip to the US and managed to get investors to get ready to invest RM18 billion into Malaysia.

The weakening of the Ringgit against the US dollar may keep Malaysia to be competitive. The Ringgit remains steady at RM3.01 against the greenback. Commodities prices which pulled back sharply earlier this month has started to find support in the past two weeks. Last week’s volatility was lower, indicating a consolidation in commodities prices. Crude oil price was maintained around US$100 per barrel. Gold price was trading slightly below US$1,500 an ounce. Meanwhile, price of crude palm oil rose 4% in a week to RM3,360 per metric ton as global demand rose significantly in April.

The FBMKLCI short to long term moving averages are still moving sideways despite the increase in the past two weeks. This indicates that the market is still in a sideway correction. However, the FBMKLCI is moving away from the moving averages and if this continues for the next two to three weeks, the averages will start to increase. The Ichimoku Cloud indicator shows that support is still strong with the FBMKLCI moving higher away from the Cloud, which acts as the support level and currently range between 1,520 and 1,530 points.

With the increase last week, momentum indicators continue to show that the bulls are dominating the market. RSI, MACD and Momentum Oscillator indicators continue to climb higher above their middle levels. The MACD indicator which crossed above its trigger line last week continues to move higher. The RSI level is now at its highest level in two months. The Bollinger Bands continue to expand and the FBMKLCI continues to trade at the upper band of this indicator. These indicators show that the bullish momentum is still strong.

With strong short term bullish momentum and a break above the resistance level, the FBMKLCI bullish rally may extend this week and test the immediate resistance level at 1,560 points. The market may move even higher as I mentioned last week that the wedge pattern breakout two weeks ago has a target of 1,580 points and this may be the next key resistance level for the FBMKLCI. Immediate support level is at 1,320 points while the key support level for the up trend remains at 1,480 points.


Top performers picked (above RM0.50 with good liquidity and volatility) last week are real-estate company Malton Berhad (MALTON) and plantation company Tradewinds Plantation Berhad (TWSPLNT).

Since early March, MALTON has a good bullish run from RM0.58 to RM0.73 in early April and went into a one month correction to a low of RM0.655. Then it rebounded and recently broke the resistance level of the correction pattern. With strong bullish momentum, its price may continue to rally after the breakout and based on the pattern and other Fibonacci projections, MALTON has a technical price target of RM0.83. Price is currently at RM0.765.

TWSPLNT had a correction since January this year after a strong bullish trend which started in August 2010 when price rallied from RM1.70 to RM3.60. Price went as low as RM2.82 in the correction and it ended when the price broke above the triangle chart pattern three weeks ago at RM3.30. With strong bullish momentum, the rally is expected to continue to the technical target level of RM4.20. Price is currently at RM3.82.