KL Composite Index: Current rally may not be able to sustain

The KLCI was expected to get some support at 1,150 points but it declined a little lower and managed to find support at 1,090 points. Since then, the KLCI made a rebound and rallied upwards to close at 1,154.09 points. Although crude palm oil futures price have declined aggressively, the KLCI remains strong because of rally in major component stocks in the KLCI like Tenaga, Telekom and Maybank.

The KLCI is still in a major down trend. The KLCI is below the short to long term 30 to 90 day moving averages and these averages are still declining. The KLCI is currently slightly below the short term moving average, which is currently at 1,160 points. The KLCI has not tested or overcome any resistance level yet to continue the upward rally. Immediate resistance to beat is 1,180 points while stronger resistance level is still at 1,300 points. Failure to overcome the immediate resistance would likely going to cause the KLCI to continue the down trend.

The price of crude palm oil futures (FPCO) is currently at RM3,001 and seems to be declining with strong momentum. Technically, the FCPO is expected to decline, further downwards. My price forecast is about RM2,310, with support level at RM2,860. Therefore, it may affect the performance of the KLCI as component heavyweights like SIME and IOICORP prices are expected to decline. Therefore, the current rally may not be able to sustain or even test the immediate resistance level at 1,180 points.

Commentary and Analysis by Benny Lee