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

27 July 2010
MARKET DATELINE

Market Technical Reading

Must Hold Above 1,350 To Confirm A Bullish Breakout…

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

Local Market Leads:

♦ Led by strong buying support on key heavyweights, the FBM KLCI finally penetrated above the 1,350 threshold for
the first time since end-Feb 2008.

♦ Earlier, investors snapped up stocks by lifting the FBM KLCI higher at above 1,350 in response to another triple-
digit rally in the US DJIA last Friday amid encouraging US earnings news and the removal of uncertainties
following the release of stress test results on European banks.

♦ Though the FBM KLCI pared down its gains at one stage amid afternoon profit-taking activities in the regional
markets, the local benchmark managed to end above 1,350 on strong late buying support on the core blue chips,
especially CIMB (+24sen). For the day, the benchmark was up 6.14 pts or 0.46% to 1,351.82.

♦ Turnover, however, eased to 851m shares, versus last Friday’s 993m shares. Market breadth turned slightly
negative with losers outpacing gainers by 355 to 336.

♦ Regionally, overseas markets ended mixed on skepticism over European banks’ stress test results. Hang Seng only
inched up 0.12%, while STI fell 0.22%.

Technical Interpretations:

♦ In line with our expectation, the FBM KLCI gapped up by opening higher on the dot of the key 1,350 technical level
with a second technical gap, and spent the day by trading at between 1,348.58 low and 1,352.94 high.

♦ Technically, the closing at above 1,350 yesterday spells a potential bullish technical breakout ahead.

♦ But due to the formation of a possible small “hangman-like” candle, which suggests a potential retreat, further
confirmation signals is still needed before we can turn bullish on the FBM KLCI’s medium-term outlook.

♦ This means if it can acquire a positive candle at above 1,350 today, this will pave the way for a further rally
towards 1,390 in the near term.

Please read important disclosures at the end of this report.

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Daily Trading Strategy:

♦ Undeniably, the successful removal of the 1,350 heavy resistance barrier yesterday marks an encouraging
technical development, as this could signal a bullish technical breakthrough on the FBM KLCI.

♦ However at this juncture, the medium-term outlook remains uncertain and we prefer to wait for more confirmation
signals, given a “hangman-like” candle was formed yesterday. Usually, a “hangman” candle means a potential
pullback ahead.

♦ We, therefore, are of the view that the FBM KLCI must secure a positive confirmation candle at above 1,350 today
in order to confirm a bullish technical breakout pattern as well as to expand its uptrend towards the next upside
target at 1,390.

♦ Otherwise, this could trigger a toppish chart formation on the chart and push the FBM KLCI back into a
consolidation mode.

♦ On the downside, we continue to see firm support near the 10-day SMA of 1,339.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 20 Jul 21 Jul 22 Jul 23 Jul 26 Jul Local Key Indices Closing
(Pts) (%)
Gainers 466 442 318 491 336 FBM KLCI 1,351.82 6.14 0.5
Losers 278 298 387 268 355 FBM 100 8,899.04 28.92 0.3
Unchanged 250 277 251 285 274 FBM ACE 3,802.01 -14.00 -0.4
Untraded 371 348 410 320 398 Major Overseas
Indices
Market Cap Dow Jones 10,525.43 100.81 1.0
Turnover Nasdaq 2,296.43 26.96 1.2
(mln shares) 1,126 875 873 993 851 S&P 500 1,115.01 12.35 1.1
Value (RM FTSE 5,351.12 38.50 0.7
mln) 1,322 1,269 1,146 1,430 1,122 Hang Seng 20,839.91 24.58 0.1
Jakarta Composite 3,023.70 -18.32 -0.6
Currency Nikkei 225 9,503.66 72.70 0.8
MYR vs US Seoul Composite 1,769.07 11.01 0.6
Dollar 3.2080 3.2135 3.2070 3.1985 3.1970 Shanghai Composite 2,588.68 16.65 0.6
SET 840.24 Closed Closed
Source: RHBInvest & Bloomberg Straits Times 2,966.99 -6.48 -0.2
Taiwan Weighted 7,787.45 26.23 0.3
India Sensex 18,020.05 -110.93 -0.6
Major Commodities
NYMEX Crude Oil
(US$/barrel) 78.98 Unch Unch
MDEX CPO – Third
Month (RM/metric ton) 2,473.00 -25.00 -1.0
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:

♦ Taking the cue from the extended rally in the US markets last Friday, the local futures index finished slightly
higher for a second day on Monday.

♦ However, the FKLI eased off from its intraday high of 1,359.0 on persistent profit-taking activities.

♦ At the close, the FKLI for Jul contract inched up only 1.00 pt or 0.07% to 1,355.00, while the Aug contract settled
at 1,354.50 with a 2.50 pts or 0.18% gain.

♦ Chart wise, the Jul contract recorded a potential “hangman” candle to imply a temporary setback today.

♦ Plus with easing short-term momentum readings, the FKLI is likely to turn lower in the coming days, if it fails to
refresh its buying momentum.

♦ Once the selling leg kicks in, we expect it to revisit the 10-day SMA of 1,343.

♦ Still, we believe that any immediate downside is well-buffered by the supportive 10-day SMA and the resistance-
turn-support region of 1,350.

♦ And as long as these supports can hold, chances for the FKLI to resume its uptrend towards 1,390 remain
optimistic.

Daily Trading Strategy:

♦ Yesterday’s “hangman” candle points to a possible retreat today.

♦ But any decline will be mild, with strong supports near 1,350 and the 10-day SMA of 1,343, in our opinion.

♦ We expect the futures index to trade from 1,349 and 1,363 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Jul 10 1358.00 1359.00 1351.50 1355.00 1.00 1355.00 6733 19580
Aug 10 1357.00 1358.50 1351.00 1354.50 2.50 1354.50 3709 2110
Sep 10 1357.00 1358.00 1351.00 1355.00 3.00 1355.50 192 562
Dec 10 1357.00 1358.00 1351.00 1354.00 2.00 1354.00 89 275

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:

♦ Wall Street extended its rally for a third day on Monday, thanks to a surprisingly stronger-than-expected new
home sales data as well as a rosy outlook from Federal Express (FedEx).

♦ It was reported that new home sales in Jun unexpectedly jumped 23.6% from May. This overturned the earlier
worries that the economy could fall back into recession.

♦ FedEx, an economic barometer, shot up 5.6% after the shipping giant hiked its quarterly and full-year financial
forecasts, citing strong international express shipments and a "continued moderate" economic recovery.

♦ On another positive development, the oversight body of the Basel Committee said it will scale back many of its
proposals to beef up bank capital and liquidity rules.

♦ On the NYMEX, the US light sweet crude oil futures for Sep delivery settled unchanged at US$78.98/barrel.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ As buying momentum accelerated, the US DJIA enjoyed another strong gain yesterday. The index surged another
100.81 pts or 0.97% to end at 10,525.43.

♦ On the chart, the Dow formed a “three white soldiers” candlestick pattern, signaling a bullish near-term direction.

♦ Aided by the upbeat momentum readings, it is poised to retake the next immediate resistance at Jun’s high of
10,594.16 soon.

♦ A further breakout from Jun’s high will confirm the end of the correction phase, and this will recharge it further
towards the next upside target at 10,850.

♦ Its solid support region is near the resistance-turned-support level at 10,150 and the 21-day SMA of 10,118.

Nasdaq Composite (Nasdaq)

♦ The Nasdaq Composite index continued to push higher with another 26.96 pts or 1.19% gain on Monday. It
settled higher for three straight days at 2,296.43 with a third bullish candle.

♦ The strong closing also suggests a further rechallenge of the next resistance level at 2,330 soon.

♦ Meanwhile, the 21-day SMA near the 2,190 level will provide strong support to the current upswing leg.

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Daily Technical Watch:

Chart 7: KKB Daily Chart 8: KKB Intraday

KKB Engineering (9466)

A possible rechallenge of the recent high of RM2.08 soon…

♦ After peaking at an all-time high of RM2.25 in mid-May, near the RM2.20 resistance hurdle, the share price of
KKB suffered a series of sharp corrections.

♦ Only when it retested the downside support level of RM1.43 in mid-Jun, a bullish reversal began to take shape.

♦ From the stronghold of RM1.43, the stock launched a powerful technical rebound to a high of RM2.08 in less than
2 weeks.

♦ But as buying momentum subsided, it slipped into a consolidation mode around the RM1.80 support region.

♦ Of late, sentiment gradually improved, with the stock edging higher slowly to end at RM1.96 yesterday with a
positive candle.

♦ Coupled with the steady improvement in the short-term momentum readings as well as rising 10-day and 40-day
SMAs, more follow-through buying activities can be expected.

♦ This means a rechallenge of the recent high of RM2.08 in the near term could be on the cards, if buyers can
sustain their activities. Beyond that, the next tough hurdles are seen at RM2.20 and the RM2.25 all-time high.

♦ Strong support is seen near the 10-day SMA and the solid RM1.80 technical level.

Technical Readings:

♦ 10-day SMA: RM1.874

♦ 40-day SMA: RM1.764

♦ Support: IS = RM1.80 S1 = RM1.43 S2 = RM1.15

♦ Resistance: IR = RM2.20

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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.

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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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