KNM may head for 70 sen in rebound

THE FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) staged a follow-through technical consolidation for the third consecutive week, moving in step with the downside consolidations on the New York and regional stock markets last week. The FBM KLCI remained below its major psychological support of 1,500 points when it closed at 1,492.05 on Friday.

Key heavyweight index-linked counters continued to play pivotal roles in the index's follow-through consolidation last week. The FBM KLCI hit an intra-week low of 1,476.82 points last Wednesday.

The FBM KLCI tumbled from its intra-week high of 1,510.13 on Monday to its intra-week low of 1,476.82 on Wednesday, giving an intra-week trading range of 33.31 points.

The FBM KLCI recorded a week-on-week loss of 14.00 points, or 0.93 per cent.

Among other indices, the FTSE Bursa Malaysia Small Cap Index lost 266.40 points, or 2.16 per cent, to 12,086.06 while the FTSE Bursa Malaysia ACE Market Index fell 315.68 points, or 6.89 per cent, to 4,268.73 on Friday.

On the foreign front, the New York Stock Exchange consolidated last week. The Dow Jones Industrial Average closed lower at 11,092.00 points on Friday, giving a week-on-week loss of 111.55 points, or 1.00 per cent.

In Hong Kong, the stock market fell in step with Wall Street's technical pullback. The Hang Seng Index closed at 22,900.96 on Friday, posting a week-on-week loss of 704.75 points, or 2.99 per cent.

The Tokyo stock exchange, meanwhile, rebounded to stay above its critical support level last week. The Nikkei 225 Index closed at 10,039.56 points, giving a week-on-week gain of 17.17 points, or 0.17 per cent.

On Bursa Malaysia, KNM Group Bhd staged a technical rebound. Its daily price trend rebounded to close at 51 sen on Friday, posting a week-on-week gain of 7 sen, or 15.91 per cent.

The following are the readings of some of its technical indicators:

Moving Averages: KNM's daily price trend stayed above all its 10-, 20-, 30-, 50- and 100-day moving averages. It continued to stay below its 200-day moving averages.

Momentum Index: Its short-term momentum index continued to stay above the support of its neutral reference line last week.

On Balance Volume (OBV): Its short-term OBV stayed above the support of its 10-day moving averages.

Relative Strength Index (RSI): Its 14-day RSI had since stayed above the 50 level. Its technical reading stood at the 66.40 per cent level at the market close last Friday.

Outlook

The consolidation of key heavyweight index-linked counters sent the FBM KLCI below its critical support of 1,500 points last week. Selected second liners continued to display interesting plays. KNM was one of these lower liners, posting a week-on-week gain of 15.91 per cent.

Chartwise, KNM's monthly price trend staged a two-month rebound in moving out of its recent congestion phase, edging to its five-month high of 51 sen.

Its weekly price trend rebounded to the underside of its intermediate-term downtrend (See KNM's weekly price trend A3:A4) on Friday.

KNM's daily price trend staged a technical breakout of its intermediate-term downtrend (See KNM's daily price trend C1:C2) on Thursday and continued to stay above it at the market close on Friday.

Its daily, weekly and monthly fast MACDs (moving average convergence divergence indicators) continued to stay above their respective slow MACDs at the market close on Friday. Thus, it augurs well for its near-term perspective.

Its 14-day Relative Strength Index (RSI) stood at the 66.40 per cent level on Friday. Its 14-week and 14-month RSI were at the 50.50 and 40.94 per cent levels respectively.

With the technical breakout of the downtrend resistance (C1:C2) on its daily price chart, KNM's daily price trend has the potential to extend its recent technical rebound towards the intermediate-term resistance level of 70 sen.

The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.

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