PP 7767/09/2011(028730)

RHB Research

Malaysia
Technical Research Institute Sdn Bhd
A member of the
8 RHB Banking Group
Company No: 233327 -M

Dail y Trad ing St rat eg y

MARKET DATELINE 7 October 2010
Market Technical Reading
Bullish Near-Term Scenario Ahead...

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

Local Market Leads:

♦ Buoyed by the overnight triple-digit rally in the US DJIA amid hopes of a possible further stimulus package ahead,
the local market extended its rebound momentum for a second day yesterday.

♦ Also, the strong rally in the overseas markets gave a further lift to the local market sentiment. Nikkei 225 rallied
another 1.81% on the recent monetary easing measures, while Kospi posted a solid gain of 1.33%.

♦ Upon closing, the FBM KLCI was up 7.42 pts or 0.50% to a fresh year high of 1,479.61, but off its intraday high of
1,483.25 on mild profit-taking activities in the afternoon.

♦ Gains were broad-based, ranging from blue chips, like Genting (+16sen) to lower liners, such as TimeCom (+1sen)
and Landmrk (+6sen).

♦ Daily turnover, however, continued to fall to 955m shares, from Tuesday’s 986m shares. Market breadth was
positive though, with 443 counters up against 330 counters down.

Technical Interpretations:

♦ The FBM KLCI gapped up with a 3.86-pt technical gap and rose to its highest level since mid-Jan 2008 at 1,483.25
(+11.06 pts), before settling the day marginally higher at above the Sep’s high of 1,479.59.

♦ Technically, the successful removal of the Sep’s high points to a further run-up ahead.

♦ Despite ending with a “star” candle, the FBM KLCI is still capable of extending its bullish momentum amid stronger
momentum indicators, especially with a fresh “buy” signal on the stochastic oscillators.

♦ This means if it can acquire a positive candle today, a rechallenge of the technical gap near 1,490.5 – 1,497.64
and the psychological level of 1,500 can be anticipated. The next level is at the all-time high of 1,524.69.

♦ Supports are seen near a technical gap at 1,472.32 – 1,476.05, followed by the 10-day SMA of 1,464.

Please read important disclosures at the end of this report.

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Daily Trading Strategy:

♦ As the FBM KLCI has removed the Sep high of 1,479.59 yesterday, it is ready for a more bullish near-term
scenario ahead.

♦ While the “star” candle could stir some profit-taking activities today, we are of the view that the index would
remain supported. Yesterday’s technical gap at 1,472.32 – 1,476.05 and the 10-day SMA of 1,464 are expected to
provide some bargain-hunting opportunities in the near term.

♦ In fact, we remain bullish and expect more upside, should the index add another positive candle on the chart
today.

♦ Next resistances are set at a technical gap near 1,490.5 – 1,497.64 and the psychological level of 1,500.
Thereafter, the index is on its way to revisit the all-time high level of 1,524.69.

♦ Going forward, investors are likely to focus on the US earnings reporting season, which will begin on Thursday and
the US monthly jobs report on Friday.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 30 Sep 1 Oct 4 Oct 5 Oct 6 Oct Local Key Indices Closing
(Pts) (%)
Gainers 329 422 501 319 443 FBM KLCI 1,479.61 7.42 0.5
Losers 399 327 295 411 330 FBM 100 9,709.43 46.19 0.5
Unchanged 280 267 258 290 283 FBM ACE 3,965.60 -9.84 -0.2
Untraded 346 338 299 337 301 Major Overseas
Indices
Market Cap Dow Jones 10,967.65 22.93 0.2
Turnover Nasdaq 2,380.66 -19.17 -0.8
(mln shares) 1,052 974 1,369 986 955 S&P 500 1,159.97 -0.78 -0.1
Value FTSE 5,681.39 45.63 0.8
(RM mln) 1,718 1,469 1,707 1,505 1,657 Hang Seng 22,880.41 241.27 1.1
Jakarta Composite 3,603.40 11.70 0.3
Currency Nikkei 225 9,691.43 172.67 1.8
MYR vs US Seoul Composite 1,903.95 25.01 1.3
Dollar 3.0835 3.0855 3.0910 3.0963 3.0890 Shanghai Composite 2,655.66 Closed Closed
SET 977.91 8.63 0.9
Source: RHBInvest & Bloomberg Straits Times 3,190.07 27.71 0.9
Taiwan Weighted 8,284.03 83.60 1.0
India Sensex 20,543.08 135.37 0.7
Major Commodities
NYMEX Crude Oil
(US$/barrel) 83.23 0.41 0.5
FCPO – Third Month
(RM/metric ton) 2,730.00 25.00 0.9
US Interest Rate Current Last Updated
21 Sep
Overnight Fed Fund Rate 0-0.25% Unch
2010
Next FOMC meeting 2-3 Nov 2010

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Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ Taking the positive cues from the bullish rallies in the overnight US and European markets, the KL futures market
continued to move higher on Wednesday.

♦ But due to mild profit-taking activities, the FKLI trimmed its early gains from a fresh year high of 1,487.0 in the
afternoon session.

♦ Still, the FKLI for Oct contract finished on a strong note, as it rose by another 9.00 pts or 0.61% to 1,484.00 on
late purchases.

♦ But on the chart, the formation of a “star” candle indicates a possible pullback today to cover a tiny technical gap
created yesterday.

♦ Having said that, we still see room for more upside ahead, especially if the FKLI scales to a new high with a
positive candle on the chart today.

♦ Support can be expected near the supportive 10-day SMA of 1,464.

♦ On the upside, a lift to beyond yesterday’s intraday high of 1,487.0 will mark a further run-up towards a higher
technical gap at 1,490 – 1,502.5 as well as the all-time high level of 1,536.

Daily Trading Strategy:

♦ Though a closing with a “star” candle implies an immediate weakness today, the overall chart view still points to
further upside in the near term.

♦ A fresh high recorded today will be enough to trigger a further “buy” signal for the aggressive traders.

♦ The trading range for the FKLI should be around 1,476 – 1,495 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Oct 10 1482.50 1487.00 1478.50 1484.00 9.00 1484.00 4778 21372
Nov 10 1483.50 1486.00 1479.00 1484.00 9.00 1484.00 149 99
Dec 10 1483.00 1486.00 1479.50 1484.00 9.50 1484.00 120 391
Mar 11 1484.00 1484.00 1482.50 1483.50 10.00 1483.50 14 142

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:

♦ US major gauges ended mixed on Wednesday after an unexpected decline in the private employment data, and
some brokers’ downgrades on tech sector.

♦ According to ADP, private employers surprisingly cut 39,000 jobs in Sep, against expectations of an increase of
20,000 jobs. But from the positive angle, the poor private hiring data reinforced the view that the Federal
Reserve will take further and more aggressive quantitative easing measures soon.

♦ On the other hand, tech stocks took a beating after Morgan Stanley downgraded its recommendations on
semiconductor stocks like Xilinx (-3.1%) and Altera (-2.8%) to “underweight” on expectations of a declining chip
orders from Asia. Data-storage service company Equinix plunged 33% after warning on its revenue outlook,
forcing brokers, like Citigroup and Wells Fargo to cut ratings on the stock.

♦ US light sweet crude oil futures for Nov delivery added another 41cents or 0.5% to US$83.23/barrel.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ The DJIA confirmed the recent bullish breakout from 10,850 yesterday and ended with a small positive candle
yesterday. For the day, it gained 22.93 pts or 0.21% to settle at 10,967.65.

♦ And with the continuous improvement on the short-term momentum readings, the expectation that the Dow will
expand its rally towards 11,250 remains strong.

♦ In fact, once the immediate hurdle of 11,250 is cleared, it will intensify its rally towards the next tough resistance
of 11,750 over a longer term.

♦ On the downside, we expect the resistance-turn-support level of 10,850 to absorb any immediate weakness.

Nasdaq Composite (Nasdaq)

♦ On the other hand, the Nasdaq Composite index failed to attract strong follow-through buying momentum on
Wednesday. Instead, the index lost 19.17 pts or 0.80% to 2,380.66.

♦ By forming a “negative harami” candle, this indicates the recent bullish momentum has slowed down.

♦ Nonetheless, as long as the index can stay at above 2,330 and the 21-day SMA of 2,324, it is still possible for the
Nasdaq to resume its rally and head higher towards the next upper resistance level of 2,470 and the Apr high of
2,535.28.

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Daily Technical Watch:

Chart 7: WCT Daily Chart 8: WCT Intraday

WCT (9679)

Removing RM3.20 will mark more “buy” signals on the stock…

♦ After a strong rally to above the RM2.40 level and hit a high of RM2.86, the share price of WCT turned into a
consolidation mode and began to move sideways.

♦ The stock was stuck within the RM2.40 to RM2.80 region for most of the time from Jul 2009 to Apr 2010.

♦ When it managed to pierce through the RM2.80 level in Apr 2010 to a high of RM3.12, it was dragged down to a
low of RM2.43 in May on a series of strong selling activities.

♦ However, in an attempt to stage a technical rebound, the stock soared and clung near the RM2.80 level from Jun
– Aug, before finally breaking out from the congestion in early Sep.

♦ Yesterday, it hit a high of RM3.19, before closing the day at RM3.16 with antoher positive candle on the chart.

♦ Technically, as the 10-day and 40-day SMAs were both heading northward with steady uptrends, its medium-
term outlook remains upbeat.

♦ If the short-term momentum indicators can maintain their current uptrend, the stock is likely to penetrate the
RM3.20 level soon, in our view.

♦ Removing RM3.20 will mark additional “buy” signals, and push the stock higher towards the RM3.74 and RM4.40
levels in the near term.

♦ On the other hand, failing to break RM3.20 will invite the sellers and press the stock back to the RM2.80 key
support level.

Technical Readings:

♦ 10-day SMA: RM3.041

♦ 40-day SMA: RM2.911

♦ Support: IS = RM2.80 S1 = RM2.40 S2 = RM1.95

♦ Resistance: IR = RM3.20 R1 = RM3.74 R2 = RM4.40

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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
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
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
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

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.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

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