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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

21 April 2010

Market Technical Reading

Removal Of The 10-day SMA Crucial To Regain Upside Momentum...

Chart 1: KLCI Daily Chart 2: KLCI Intraday

Local Market Leads:

♦ Boosted by the overnight US markets rebound and the regional bourses’ strength, the local market staged a firm
recovery on mild bargain-hunting supports yesterday.

♦ Investors returned to snap up stocks, encouraged by news of split votes in the US Securities and Exchange
Commission’s (SEC) decision to charge Goldman Sachs for fraud earlier. This has eased concerns that other
banks could be sued. The strong earnings from Citigroup also renewed optimism over the 1Q reporting season.

♦ In fact, investors also overlooked the additional property tightening measure in China, and an increase on the key
interest rate by the Indian central bank. Beijing said it would ban property developers from accepting prepayment
on uncompleted housing without official approval.

♦ Recovery momentum strengthened in the afternoon after European markets started the day on a stronger note,
joining rebounds across Asian regional markets, such as SET (+5.43%) and Hang Seng (+1.02%).

♦ The FBM KLCI jumped 9.23 pts or 0.70% to 1,335.90 for the day. However, turnover slowed to 797m shares
from Monday’s 813m shares. There were 456 counters up versus 230 counters down.

Technical Interpretations:

♦ The FBM KLCI registered a positive candle yesterday and ended on the dot of the 10-day SMA of 1,336.

♦ The candle pattern, following Monday’s “hammer” candle, and a fresh “buy” signal on the stochastic oscillators
implied that the index could stage further recovery today.

♦ However, a complete removal of the 10-day SMA, with a turnover of at least 1.0bn shares is needed to continue
this rebound. Failure to meet the above criteria will bring back the strong selling momentum.

♦ In other words, a retreat from the 10-day SMA will resume its downtrend towards the 40-day SMA of 1,314, the
2.6-pts technical gap at 1,305 and the 1,300 psychological level in the near term.

Please read important disclosures at the end of this report.

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Daily Trading Strategy:

♦ Technically, the formation of a positive candle and the better momentum readings suggest a possible further
rebound today, if the FBM KLCI crosses to above the 10-day SMA of 1,336.

♦ However, the continued fall in the daily turnover and the failure to completely remove the 10-day SMA yesterday
implied that there is still risk ahead for the index to regain its upward momentum.

♦ Only if the index chalks up a positive confirmation candle to above the 10-day SMA and manages to increase the
daily trading volume to above the 1.0bn shares mark, will it see a strong return in trading momentum. Otherwise,
we expect sellers to resume their activities soon.

♦ Chart wise, the short-term downside targets for the FBM KLCI have remained unchanged at the 40-day SMA of
1,314, a 2.6-pts technical gap near 1,305 and the 1,300 level.

♦ On the upside, a removal of the 10-day SMA will boost the trading sentiment and hence, leading the index to the
recent high of 1,347.61, before resuming its previous medium-term target at 1,390.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 14 Apr 15 Apr 16 Apr 19 Apr 20 Apr Local Key Indices Closing
(Pts) (%)
Gainers 375 293 201 134 456 FBM KLCI 1,335.90 9.23 0.7
Losers 325 406 495 622 230 FBM 100 8,785.56 60.92 0.7
Unchanged 282 298 305 219 293 FBM ACE 4,165.09 22.01 0.5
Untraded 375 363 359 388 384
Major Overseas
Market Cap Indices
Turnover Dow Jones 11,117.06 25.01 0.2
(mln shares) 845 1,045 784 813 797 Nasdaq 2,500.31 20.20 0.8
Value (RM S&P 500 1,207.17 9.65 0.8
mln) 1,364 1,638 1,207 1,210 1,218 FTSE 5,783.69 55.78 1.0
Hang Seng 21,623.38 218.21 1.0
Currency Jakarta Composite 2,891.27 50.84 1.8
MYR vs US Nikkei 225 10,900.68 -8.09 -0.1
Dollar 3.1990 3.1925 3.1880 3.2150 3.2045 Seoul Composite 1,718.03 12.73 0.7
Shanghai Composite 2,979.53 -0.77 0.0
Source: RHBInvest & Bloomberg SET 765.76 39.47 5.4
FT Straits Times 2,981.37 20.44 0.7
Taiwan Weighted 7,900.42 46.20 0.6
India Sensex 17,460.58 59.90 0.3
Major Commodities
NYMEX Crude Oil
(US$/barrel) 83.45 2.00 2.5
MDEX CPO – Third
Month (RM/metric ton) 2,498.00 28.00 1.1
US Interest Rate Current Last Updated
Overnight Fed Fund 16 Mar
0-0.25% Unch
Rate 2010
Next FOMC meeting 27-28 Apr 2010

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Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ After suffering three days of strong selldown, the KL futures market turned around with a strong rebound

♦ The FKLI opened 5.50 pts higher at 1,327.50, before trending higher all the way towards the 1,337.50 day high.

♦ For the day, the FKLI for Apr contract ended up sharply at 1,336.50 with a 14.50 pts or 1.10% gain.

♦ On the chart, the futures index registered a bullish cnadle, pointing to a further rebound today.

♦ However, the futures index failed to penetrate the 10-day SMA of 1,337 in bids to reclaim positive short-term
momentum yesterday.

♦ As a result, the futures index might still face significant resistance at the 10-day SMA in the immediate term.

♦ Higher resistance is seen near the previous high of 1,350.50, while the supports are set at the 40-day SMA near
1,316 and the key 1,300 psychological level.

Daily Trading Strategy:

♦ Yesterday’s strong closing indicates further upside potential today.

♦ But until it can fully reclaim the 10-day SMA, the risk of resuming the recent selldown momentum is fairly high.
As a result, buyers should wait-and-see before taking any position today.

♦ Today’s trading band is likely to be within 1,330 to 1,341.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Apr 10 1327.50 1337.50 1327.00 1336.50 14.50 1336.50 4633 18941
May 10 1328.00 1337.50 1327.50 1336.50 15.00 1336.50 594 954
Jun 10 1327.00 1336.00 1327.00 1335.00 15.00 1335.00 131 500
Sep 10 1326.00 1336.00 1326.00 1335.00 15.50 1335.00 37 224

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 markets extended their recovery momentum for a second day on Tuesday, led by energy stocks amid a rally
in crude oil prices as well as strong earnings from several companies.

♦ Energy stocks, including Exxon Mobil (+1.1%) and Chevron (+0.9%) ended higher, after crude oil prices soared
more than 2% following the resumption of flights at some European airports.

♦ The US light sweet crude oil futures for May delivery rallied US$2.0 or 2.45% to US$83.45/barrel.

♦ Investors also welcomed better-than-expected quarterly profits from Goldman Sachs and Johnson & Johnson, but
the former fell another 2.1% after the UK regulators also launched a probe against the company.

♦ After the close, Apple Inc’s share price shot up more than 6% as its quarterly results beat expectation. But Yahoo
dipped 1.9% on quarterly revenue that slightly missed expectation.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ As bargain-hunting activities picked up, the US DJIA added another 25.01 pts or 0.23% to 11,117.06 yesterday.

♦ With a small positive candle on the chart, a rechallenge of the recent high of 11,154.55 can be expected soon.

♦ But as we reiteraited, a complete removal of the recent high and the immediate-term resistance level of 11,250 is
needed to turn the index’s near-term sentiment back to bullishness.

♦ Otherwise, selling could still resume and press the index towards the 21-day SMA near 10,943 and the crucial
breakout point at 10,850 due to the mixed short-term momentum.

Nasdaq Composite (Nasdaq)

♦ In line with our expectation, the Nasdaq Composite Index shot up 20.20 pts or 0.81% to 2,500.31 with a small
positive candle yesterday.

♦ And if it can secure enough follow-through buying momentum today, it will rechallenge the recent high of
2,517.82 soon.

♦ But for it to resume its bullish uptrend momentum, it has to break out from 2,517.82 in order to push for further
upside towards the next resistance at 2,630. Immediate support still stays at 2,470.

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Daily Technical Watch:
Chart 7: Faber Daily Chart 8: Faber Intraday

Faber Group (1368)

Still shying away from recrossing the RM2.29 important level…

♦ Faber’s share price broke out form a congestion area at around RM1.51 to RM1.65 region in Feb 2010, with a
2sen technical gap on the chart and began its rally to the north.

♦ The stock climbed steeply across the resistance levels of RM1.81 and RM1.98, before taking a breather above the
RM1.98 level in late Mar 2010.

♦ Briefly, the stock resumed its rally and blasted towards the RM2.29 critical resistance level and followed swiftly
with another chart breakout.

♦ By mid-Apr 2010, the stock has already traded near the RM2.60 heavy resistance level, with an intraday high of

♦ However, after touching that level, the stock triggered a steep follow-through selling momentum that dragged it
to below the 10-day SMA of RM2.45 and marginally missed the RM2.29 level recently.

♦ Although the stock recovered marginally to RM2.28 yesterday, and the short-term momentum indicators have
ticked upward to indicate further upside today, it was still shying away from recrossing the RM2.29 level.

♦ Without conquering this level, it will not be able to trigger a technical rebound, in our view.

♦ As a result, we are skeptical on its ability to trigger a technical rebound from the current level, should it stay at
below the RM2.29 level in the near term.

♦ Lower support levels are seen near the 40-day SMA of RM2.176 and RM1.98, while higher resistance is at the 10-
day SMA of RM2.45 and RM2.60.

Technical Readings:

♦ 10-day SMA: RM2.45

♦ 40-day SMA: RM2.176

♦ Support: IS = RM1.98 S1 = RM1.81 S2 = RM1.65

♦ Resistance: IR = RM2.29 R1 = RM2.60

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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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