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The local market was slightly bullish last week amid rebounds in regional markets. The FBMKLCI managed to stay above the 1,560 points resistance level at 1,563.19 points Thursday and went as high as 1,567.35 points on Wednesday. The FBMKLCI traded between 1,556.04 and 1567.35 points. The close near the week’s high shows a bullish market. Volume increased about 30% higher last week compared to the previous week to a daily average of 930 million shares. The benchmark index was supported by last minute buying on some days for the past two weeks or so and this indicates that some institution has been accumulating for the past few weeks.

Other equities markets ended mixed. For the past one week, the Dow Jones Industrial Average increased 0.7% to 12,050 points while UK’s FTSE 100 index declined 0.4% to 5,674.38 points. France’s CAC 40 index fell 0.6% to 3,783.99 points. In Asia Tuesday, Hong Kong Hang Seng Index lost 0.9% to 21,759.14 points while Singapore Straits Times Index gained 0.8% to 3044.72 points.

Prices of commodities were down last week as global economic sentiment is weak. Price of crude oil continues to slide 3.4% to US$92.35 a barrel in a week on NYMEX while price of gold fell 0.6% to US$1,521.30 an ounce on COMEX. Technically, Price of crude oil may fall to US$86. Crude palm oil fell on higher than expected production in May. Crude Palm Oil in Bursa Malaysia declined 1.8% to RM3,136 per metric ton. The Malaysian Ringgit regained strength last week. The Ringgit is currently at RM3.01 against a US dollar as compared to RM3.03 in the previous week.

Technically, the price trend is bullish for the FBMKLCI. The short to long term 30 to 90 day moving averages are increasing and the index was supported well by the short term 30 day moving average. The weak momentum in the previous week has started to become strong. The Ichimoku Cloud continues to rise and started to widen and the ADX indicator starts to increase as well. These indicators show a good bullish momentum in the short term. From the moving averages and Ichimoku Cloud, support level for the uptrend is now between 1,530 and 1,545 points.

The bulls continue to be in control in the longer term and the RSI, MACD and Momentum Oscillators started to climb last week but not able to go higher than the high set earlier this month. The index is at the top band of the Bollinger Bands but the bands are not yet expanding. The indicators show that market is currently testing the resistance level and further increase this week would boost market confidence and bring FBMKLCI higher.

Now that the index is able to stay above 1,560 points, there is a high chance that the index is going to test the next resistance level. The market will be cautious as regional markets are facing selling pressure and falling commodities prices indicate a fragile global economy. Obviously, the next resistance is at the historical high at 1,577 points and moving forward, the index could also achieve the longer term target which I have set earlier this year at 1,650 points. The market should remain bullish as long as the uptrend support level mentioned earlier is not broken.

Daily KLCI chart as at 23 June 2011 using NextVIEW Advisor Professional

Counter that made the highlight last week is real-estate company Equine Capital Berhad (Equine). Share price of Equine has been increasing steadily for the past one week with steady increase in volume. The price trend was in a consolidation for about three months after the price rallied to RM0.59 from March to early April. The price pulled back to RM0.47 in the consolidation period and is currently at RM0.565. Last week, the price broke above the Bollinger Bands and the bands are expanding. Momentum indicators RSI and ADX rose sharply. These indicators indicate a strong bullish move.

With strong bullish momentum, the price is expected to rally and has a chance of moving to the next technical target of RM0.65. The immediate resistance is at RM0.60. A trailing stop of RM0.04 based on a 1.5 times the 3-period ATR indicator can be used as a stop loss. A target at RM0.59 has a potential profit to risk ratio of 1 to 1 while a target at 0.65 will provide a ratio of about 2 to 1 at current price.