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

22 July 2010
MARKET DATELINE

Market Technical Reading

Selling On The Recent Highflyers May Dampen Sentiment…

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

Local Market Leads:

♦ Bursa Malaysia expanded its gains for a second day yesterday, thanks to the overnight US markets’ recovery.

♦ But as regional investors turned cautious ahead of the US Federal Reserve Chairman, Ben Bernanke’s 2-day
congressional testimony starting late Wednesday, plus strong selling pressure in glove-related stocks in the local
bourse, profit-taking activities persisted in the afternoon session.

♦ At day end, the FBM KLCI settled at 1,341.02 with a 3.35 pts or 0.25% gain, but off its nearly 2-month high of
1,344.96.

♦ CIMB (+9sen) led banking stocks higher on optimism over banks’ upcoming earnings results, while consumer-
related stocks, like Cocolnd (+31sen) and GuanChg (+33sen) outshone the market with stunning rallies.

♦ Total turnover declined to 875m shares from Tuesday’s 1.13bn shares, as prolonged profit-taking activities on the
recent active lower liners kept retail investors puzzled at the sidelines. Even so, the market breadth remained
robust with 442 counters up beating 298 counters down.

Technical Interpretations:

♦ The FBM KLCI gapped up for the second day in a row, though the gaps were tiny, it still indicates that the market
sentiment may continue to improve in the near term.

♦ However, as the index closed off its day high, it registered a small “shooting star” candle. The pattern indicates a
possible pullback today.

♦ But in our view, downside could be limited, given the underlying positive short-term outlook and a marginal “buy”
signal on the stochastic oscillators and a mild improvement on the 14-day RSI.

♦ Technically, as it remains at above the 10-day SMA of 1,332, it still holds a chance to retest the 1,350 key
resistance level in the near term.

Please read important disclosures at the end of this report.

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Daily Trading Strategy:

♦ Nevertheless, yesterday’s candlestick pattern still points to a possible pullback ahead.

♦ Added with a decline on daily turnover, the active lower liners, which were seen as the key drivers for the
improved market sentiment of late, could be vulnerable for continuous selling pressure due to T+3 and T+4
factors, if turnover on those highflyers fail to improve soon.

♦ That said, given the firmer momentum readings and the solid support from the 10-day SMA of 1,332, any pullback
is expected to be shallow.

♦ In fact, we remain hopeful that the sentiment should continue to improve, with active rotational plays spilling over
to the other sectors, like the banking stocks, and that the FBM KLCI may gear up to retest the 1,350 key
resistance level.

♦ However, as we highlighted, the overall market turnover should maintain around 800m – 1.0bn shares mark in the
near term, to keep up the upbeat sentiment.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 15 Jul 16 Jul 19 Jul 20 Jul 21 Jul Local Key Indices Closing
(Pts) (%)
Gainers 242 476 327 466 442 FBM KLCI 1,341.02 3.35 0.3
Losers 390 206 324 278 298 FBM 100 8,842.32 24.39 0.3
Unchanged 289 263 269 250 277 FBM ACE 3,803.51 26.89 0.7
Untraded 443 424 444 371 348 Major Overseas
Indices
Market Cap Dow Jones 10,120.53 -109.43 -1.1
Turnover Nasdaq 2,187.33 -35.16 -1.6
(mln shares) 620 794 849 1,126 875 S&P 500 1,069.59 -13.89 -1.3
Value (RM FTSE 5,214.64 75.18 1.5
mln) 1,128 1,196 1,331 1,322 1,269 Hang Seng 20,487.23 222.64 1.1
Jakarta Composite 3,013.40 17.96 0.6
Currency Nikkei 225 9,278.83 -21.63 -0.2
MYR vs US Seoul Composite 1,748.78 12.01 0.7
Dollar 3.1975 3.2065 3.2240 3.2080 3.2135 Shanghai Composite 2,535.39 6.66 0.3
SET 830.93 6.52 0.8
Source: RHBInvest & Bloomberg FT Straits Times 2,926.09 -22.52 -0.8
Taiwan Weighted 7,701.29 -10.74 -0.1
India Sensex 17,977.23 99.09 0.6
Major Commodities
NYMEX Crude Oil
(US$/barrel) 76.56 -1.02 -1.3
MDEX CPO – Third
Month (RM/metric ton) 2,461.00 37.00 1.5
US Interest Rate Current Last Updated
22-23 Jun
Overnight Fed Fund Rate 0-0.25% Unch
2010
Next FOMC meeting 10 Aug 2010

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Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ Despite a sluggish cash market sentiment, the FKLI managed to shrug off profit-taking pressure and closed the
day higher for the first time in three trading days yesterday.

♦ The FKLI for Jul contract closed up 7.50 pts or 0.56% at 1,344.50, after testing a day high of 1,347.50.

♦ But, the futures index recorded a “hangman” candle on the chart upon closing. This displays a potential reversal
ahead.

♦ Unless the FKLI can chalk up a positive candle today and breaks out from 1,347.5, it could retreat slightly on mild
selling today.

♦ Nonetheless, the FKLI’s short-term outlook remains positive as it stays at above the immediate support at the 10-
day SMA near 1,336.

♦ Buying momentum may still recover if sentiment improves after a brief pullback to the SMA.

♦ For the medium-term, outlook will turn bullish if it surpasses May’s high of 1,352.5.

♦ Beyond that, the futures index may head towards 1,390.

Daily Trading Strategy:

♦ The record of a “hangman” candle at the recent high of 1,347.5 yesterday spells immediate-term weakness ahead.

♦ But, traders should be looking at the support near the 10-day SMA of 1,336 to determine their short- to medium-
term strategy.

♦ In our view, the trading band for the FKLI is likely to range around 1,336 to 1,345 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Jul 10 1347.00 1347.50 1340.00 1344.50 7.50 1344.50 4679 18952
Aug 10 1342.00 1346.50 1339.50 1344.50 7.50 1344.50 573 1316
Sep 10 1344.50 1346.00 1339.00 1343.50 6.50 1343.00 153 511
Dec 10 1343.00 1345.50 1339.00 1344.50 7.50 1343.50 33 267

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:

♦ Shaken by the US Federal Reserve chairman Ben Bernanke’s downbeat comments over the US economic prospect,
plus no signs of new stimulus measures, Wall Street responded with a strong selldown last night.

♦ Bernanke in a 2-day congressional testimony said the outlook for the US economy was "unusually uncertain".
Though the central bank is ready to take necessary actions to spur growth, he added that the Fed hasn’t decided
on what actions it might take.

♦ In fact, the downbeat assessment on the US economic outlook overshadowed strong earnings from Morgan
Stanley (+6.3%), Wells Fargo (+0.6%) and Apple (+0.9%).

♦ Also, the US light sweet crude oil futures for new month - Sep delivery reacted neagatively with a decline of
US$1.02 or 1.3% to US$76.56/barrel.

♦ After the close, Qualcomm and eBay traded higher on better-than-expected quarterly earnings.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ The US DJIA surprisingly dropped 109.51 pts or 1.07% to 10,120.45 in the afternoon session, at below the key
10,150 technical support.

♦ The chart repoints to further downside risk following a breakdown from 10,150 and a formation of a bearish
candle on the chart.

♦ Added with a fresh “sell” signal on the 14-day RSI, it is vulnerable for a retest of the 21-day SMA of 10,093 and
the 10,000 psychological level soon, where a further breakdown could threaten the recent recovery mode.

♦ To prevent this from happening, the DJIA must quickly regain above 10,150.

Nasdaq Composite (Nasdaq)

♦ After a 2-day strong rebound, sellers unexpectedly returned by hammering the Nasdaq Composite index sharply
lower by 35.16 pts or 1.58% to 2,187.33 yesterday.

♦ It fell slightly to below the crucial 2,190 and ended on the dot of the 21-day of 2,188 with a bearish candle. This
shows that if no quick rebound occurs today, it could experience further selldown towards 2,100 soon.

♦ On the upside, last Wednesday’s high of 2,260.33 remains a tough technical barrier.

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Daily Technical Watch:

Chart 7: POS Daily Chart 8: POS Intraday

Pos Malaysia (4634)

Potential short-term weakness to the 10-day SMA soon…

♦ The share price of Pos moved out from the previous slumpy trading in Mar 2010, when it jumped across the
RM2.04 key level.

♦ The breakout triggered a series of buying momentum, and led the stock to a high of RM3.21 in Apr 2010.

♦ But, as it failed to sustain at above RM3.07, it fell into a consolidation phase to a low near RM2.44 in May.

♦ Thereafter, the stock built a base around RM2.54 – RM2.80 and resumed its upward momentum in Jun.

♦ Of late, the stock has successfully removed the RM3.07 tough hurdle, and reached a high of RM3.34.

♦ However, the last two trading days saw the stock registering two consecutive “shooting star” candles on the
chart.

♦ This suggests that in the event if it fails to reclaim the RM3.26 resistance level and chalks up fresh year-high
above RM3.34, it could undergo a pullback on its share price.

♦ A reliable support is then seen at RM3.07, near the 10-day SMA of RM3.08. But a medium-term support is only
seen at RM2.80.

♦ On the upside, a successful removal of RM3.26 and RM3.34 levels will mean a revisit to RM3.40 higher level on
follow-through buying support is likely.

Technical Readings:

♦ 10-day SMA: RM3.08

♦ 40-day SMA: RM2.901

♦ Support: IS = RM3.07 S1 = RM2.80 S2 = RM2.54

♦ Resistance: IR = RM3.26 R1 = RM3.40

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IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
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may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
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The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
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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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actions of third parties in this respect.

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