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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 May 2010

Market Technical Reading

A “Dead Cross” Suggests Bearish Medium-term Outlook...

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

Local Market Leads:

♦ Asian markets, including Bursa Malaysia bore the brunt of another fresh selling wave on Thursday, after
attempted to halt the recent slide by staging a mild rebound in the early session.

♦ Selling activities returned on concerns over uncertainties in the Eurozone as well as renewed geopolitical tension
in Korean peninsula after South Korea accused North Korea of torpedoing its warship in Mar.

♦ But thanks to the timely rebound in the key European markets, most Asian markets closed off low for the day.
Hang Seng ended down 0.17% to 19,545.83, but well off a low of 19,276, its lowest level since July 2009.

♦ Similarly, the benchmark FBM KLCI dropped 4.07 pts or 0.31% to 1,304.16 on late bargain-hunting support, after
hitting a fresh 2-month low of 1,300.44 at one stage.

♦ Turnover eased to 765m shares versus Wednesday’s 782m shares. There were 449 losers against 250 gainers.

Technical Interpretations:

♦ Weighed down by growing bearishness, the FBM KLCI retested the major psychological support of 1,300 at
1,300.44 before making a slow recovery.

♦ It concluded the day with a “doji-like” candle, suggesting a pause on the recent sell mode.

♦ This was in line with our expectation that the index would retest the 1,300 level. Overall, as the index stays
below the 10-day and 40-day SMAs near 1,331 and 1,334, the bearish view remains intact.

♦ Furthermore, given the persistent bearish momentum on the indicators, the index is poised to resume its
downtrend soon, in our view.

♦ As we reiterated, losing the 1,300 psychological level will intensify the selling momentum and drag the index
towards 1,250, followed by a lower psychological support at 1,200.
Please read important disclosures at the end of this report.

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Daily Trading Strategy:

♦ Although the FBM KLCI has managed to defend the key psychological threshold of 1,300 yesterday, by staging a
mild recovery from 1,300.44 low, the overall technical landscape remains bearish.

♦ In fact, given the newly cut “dead cross” pattern on the 10-day and 40-day SMAs, the medium-term chart
outlook on the FBM KLCI has also turned bearish.

♦ As turnover and trading sentiment remain unfavourable, and added with another plunge in the overnight US
market, the FBM KLCI may even open with a gap-down at below the 1,300 level today, in our opinion.

♦ We, therefore, maintain our bearish call on the market and expect the FBM KLCI to head towards the 1,250
support, before retesting another psychological level at 1,200 in the near term.

♦ For the medium term, we foresee a stabilisation zone at between the 23.6% Fibonacci Retracement (FR) level
and the 38.2% FR level near 1,154 – 1,229 region.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 14 May 17 May 18 May 19 May 20 May Local Key Indices Closing
(Pts) (%)
Gainers 293 187 336 135 250 FBM KLCI 1,304.16 -4.07 -0.3
Losers 371 557 295 689 449 FBM 100 8,531.28 -31.86 -0.4
Unchanged 260 194 287 175 274 FBM ACE 3,926.11 -6.63 -0.2
Untraded 453 439 460 379 405
Major Overseas
Market Cap Indices
Turnover Dow Jones 10,068.01 -376.36 -3.6
(mln shares) 682 633 691 782 765 Nasdaq 2,204.01 -94.36 -4.1
Value (RM S&P 500 1,071.59 -43.46 -3.9
mln) 1,084 1,009 1,144 1,403 1,415 FTSE 5,073.13 -84.95 -1.6
Hang Seng 19,545.83 -33.15 -0.2
Currency Jakarta Composite 2,694.25 -35.23 -1.3
MYR vs US Nikkei 225 10,030.31 -156.53 -1.5
Dollar 3.1835 3.2265 3.2100 3.2510 3.2720 Seoul Composite 1,600.18 -29.90 -1.8
Shanghai Composite 2,555.94 -31.87 -1.2
Source: RHBInvest & Bloomberg SET 765.54 Closed Closed
FT Straits Times 2,753.51 -21.03 -0.8
Taiwan Weighted 7,424.43 -134.73 -1.8
India Sensex 16,519.68 111.19 0.7
Major Commodities
NYMEX Crude Oil
(US$/barrel) 68.01 -1.86 -2.7
MDEX CPO – Third
Month (RM/metric ton) 2,476.00 41.00 1.7
US Interest Rate Current Last Updated
Overnight Fed Fund 27-28 Apr
0-0.25% Unch
Rate 2010
Next FOMC meeting 22-23 June 2010

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Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ Helped by an unexpected rebound on Hang Seng Index and a mild rebound in the European markets, the local
futures index recovered from a nearly 2-month low at below the 1,300 psychological support on late bargain
buying yesterday.

♦ At the close, the FKLI for May contract ended at above 1,300 by settling at 1,303.50 with a marginal decline of
0.5 pt or 0.04%. But it still recorded a negative candle and it was well below its day high of 1,313.50.

♦ Technically, the late recovery has managed to postpone the breakdown of 1,300 yesterday. But it is still not
enough to reverse the current bearish momentum.

♦ We see higher downside risk for the FKLI to resume its selling momentum today.

♦ With a backdrop of poorer short-term momentum readings, the futures’ sentiment could continue to be under

♦ Note that, a fall from 1,300 will trigger a steeper downswing on the FKLI, to the immediate target at 1,270,
before heading towards another plunge to 1,200.

♦ On the upside, we continue to see strong hurdles near the 10-day and 40-day SMAs at the 1,329 and 1,334

Daily Trading Strategy:

♦ Stay “bearish”, despite a timely recovery to above 1,300 yesterday.

♦ A loss of 1,300 will force a steeper retreat on the FKLI’s near-term trend.

♦ The futures index is expected to swing from 1,280 to 1,305 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
May 10 1308.50 1313.50 1296.00 1303.50 -0.50 1303.50 9739 21587
Jun 10 1307.50 1313.50 1296.00 1302.50 -2.00 1302.50 1310 1757
Sep 10 1311.00 1314.50 1297.00 1304.00 -1.50 1304.00 233 289
Dec 10 1312.50 1315.50 1298.00 1304.50 -3.00 1304.50 115 209

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 plunged more than 3.6% on Thursday, on fears that the European debt crisis would jeopardise
the global economic recovery as well as disappointment over some US economic data.

♦ In fact, selling momentum accelerated in the late session, after the US Senate voted 60-40 to end debate,
clearing the way for a final vote on the financial overhaul legislation, possibly happen during this weekend.

♦ As doubts over the European leaders’ ability to end the debt crisis grew, investors decided to unload companies
with heavy international exposure, on concerns that the European debt crisis could halt the global economic
recovery. As a result, Caterpillar and 3M took a hard beating, falling another 4.5% and 3.5% respectively.

♦ On the economic front, unemployment claims unexpected rose to 471,000 last week and the Conference Board’s
index of leading economic indicators surprisingly dipped 0.1%.

♦ The expired US light sweet crude oil futures for June delivery stumbled US$1.86 or 2.7% to US$68.01/barrel.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ With sellers dominating the market scene, the US DJIA plummeted 376.36 pts or 3.60% to 10,068.01, extending
its losing streak for the three straight days.

♦ Sealed with a huge bearish candle, this has totally wiped out the previous “hammer” candle.

♦ In fact, with a breakdown to below the lower end of the 10,150 – 10,850 consolidation range, it is poised to
expand its correction mode towards the recent low of 9,869.62, before moving into the next crucial support
region of 9,200 – 9,700.

♦ Following yesterday’s significant breakdown, the DJIA has confirmed its fall into the major correction mode.

Nasdaq Composite (Nasdaq)

♦ Likewise, the Nasdaq Composite Index overturned the previous “morning star” candle by posting a whooping
94.36 pts or 4.11% loss to end at 2,204.01.

♦ Judging from the poor closing with a huge bearish candle, a retest of 2,190 and the recent low of 2,185.75 looks
imminent. Breaching these supports will mean a deeper correction towards 2,000 – 2,100 support region soon.

♦ Its immediate resistance is seen at yesterday’s technical gap near 2,270.62, followed by 2,330.

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

AirAsia (5099)

Further retracement to the lower support of RM1.09 – RM1.17…

♦ After a successful breakout from the RM1.28 resistance level in Jul 2009, AirAsia’s share price rose to the one-
and-a-half year high of RM1.57 in Aug 2009.

♦ Thereafter, the stock encountered constant selling pressure, retreating slowly towards the RM1.28 important
support level in the following months.

♦ Although it has touched a low of RM1.22, it was sustained at above RM1.28 for most of the time as it traded

♦ After months of range-bound trading, the stock eased to below the RM1.40 level in early Apr 2010, before losing
its short-term momentum of late and broke below RM1.28 this week.

♦ The stock touched a low of RM1.17 before closing at RM1.20 yesterday, and registered four bearish candles in a

♦ Technically, it has confirmed a negative breach to below RM1.28. Chart wise, this is pointing to retracement to
the lower support zone of RM1.09 – RM1.17 region in the near term.

♦ If it loses this support zone, it may dip further towards the RM0.98 critical stronghold level next.

♦ Any attempt to stage a rebound will be capped by the support-turn-resistance level of RM1.28, going forward.

Technical Readings:

♦ 10-day SMA: RM1.284

♦ 40-day SMA: RM1.34

♦ Support: IS = RM1.17 S1 = RM1.09 S2 = RM0.98

♦ Resistance: IR = RM1.28 R1 = RM1.40 R2 = RM1.50

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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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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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