PP 7767/09/2010(025354



Technical Research
Da ily T rad ing S trat egy

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


9 July 2010

Market Technical Reading
Volume Growth Crucial To Sustain This Rebound...
Chart 2: FBM KLCI Intraday

Chart 1: FBM KLCI Daily

Local Market Leads:

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Bursa Malaysia extended its recent winning streak on Thursday, but gains were limited as investors turned cautious ahead of Bank Negara’s Monetary Policy Committee (MPC) meeting announcement. The local benchmark FBM KLCI opened the day firmly in response to a 275-pts rally in the overnight US DJIA, but profit-taking activities quickly stepped in in late morning prompting the index to pare its early gain. But thanks to the last-minute buying activities, the FBM KLCI settled higher for the third straight day at 1,316.03, gaining 4.28 pts or 0.33% for the day. Regionally, investors were optimistic on the upcoming second-quarter earnings reporting season in the US, and cheered on news that the International Monetary Fund (IMF) has raised the global economic growth forecast to 4.6% for 2010, from 4.2%. Trading interest, however, remained subdued with only 533m shares changing hands, compared with 540m shares traded a day earlier. There were 365 gainers against 242 losers. After the market closed, Bank Negara announced its decision to hike its overnight policy rate (OPR) by 25bps to 2.75%.

Technical Interpretations:

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The FBM KLCI opened strongly with a 1-pt gap, and climbed to above the 10-day SMA of 1,314, before closing the day with a small positive candle. Collecting its third positive candle on the chart, the index is likely to continue the current upswing, in our view. Further upside will lead the index to the recent high of 1,335.31 and to retest the 1,350 significant resistance level. However, as the index merely closed 2 points above the 10-day SMA, further confirmation is needed to avoid a sharp pullback to cover the 1-pt technical gap. For now, strong supports can be found near the 40-day SMA of 1,304 and the key psychological level of 1,300.
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9 July 2010 Daily Trading Strategy:

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As highlighted earlier, the removal of the 10-day SMA of 1,314 with another positive candle on the chart has confirmed that a technical rebound is underway for the FBM KLCI. Buoyed further by the upbeat momentum readings, the benchmark stands a good chance to extend its upside towards June’s high of 1,335.31 and even to retest the tough hurdle of 1,350 in the near term. But critically, the index must sustain at above the 10-day SMA in the near term in order to avoid a sudden pullback on profit-taking pressure. Also, crucially, the daily turnover should grow in the coming sessions for trading sentiment to improve further and ultimately to sustain the current recovery leg. Otherwise, the index will risk falling back to below the 10-day SMA, which will threaten this rebound, in our view.

Table 1 : Daily Statistics Scoreboard 02 Jul Gainers 286 Losers 300 Unchanged 263 Untraded 514 Market Cap Turnover (mln shares) Value (RM mln) Currency MYR vs US Dollar

05 Jul 182 425 270 484

06 Jul 405 195 273 488

07 Jul 275 307 272 506

08 Jul 365 242 275 478

626 974

450 718

622 970

540 919

533 971






Source: RHBInvest & Bloomberg

Table 2 : Major Indices & Commodities Change Change Local Key Indices Closing (Pts) (%) FBM KLCI 1,316.03 4.28 0.3 FBM 100 8,659.52 33.50 0.4 FBM ACE 3,769.85 12.48 0.3 Major Overseas Indices Dow Jones 10,138.99 120.71 1.2 Nasdaq 2,175.40 15.93 0.7 S&P 500 1,070.25 9.98 0.9 FTSE 5,105.45 90.63 1.8 Hang Seng 20,050.56 193.49 1.0 Jakarta Composite 2,915.91 13.87 0.5 Nikkei 225 9,535.74 256.09 2.8 Seoul Composite 1,698.64 22.99 1.4 Shanghai Composite 2,415.15 -5.97 -0.2 SET 817.57 2.89 0.4 FT Straits Times 2,897.15 36.12 1.3 Taiwan Weighted 7,608.85 74.39 1.0 India Sensex 17,651.73 180.70 1.0 Major Commodities NYMEX Crude Oil (US$/barrel) 75.44 1.37 1.8 MDEX CPO – Third Month (RM/metric ton) 2,290.00 20.00 0.9 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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9 July 2010

Chart 3: FKLI Daily

Chart 4: FKLI Intraday

Technical Interpretations:

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Local futures market sentiment ran high on Wall Street’s overnight rally yesterday. The local futures index staged a nearly 1% rally for the day. But just after hitting an intraday high of 1,322.50 (+18.0-pts), the FKLI began to encounter strong profit-taking activities. The FKLI for Jul contract ended up by 12.00 pts or 0.92% to 1,316.50, with a 7.5-pt gap on the chart. As the futures index has successfully climbed to above the 10-day SMA of 1,312 yesterday, chances for a sustainable recovery ahead have increased. Added with a renewed uptick signal on the short-term momentum indicators, the futures index could extend its recovery momentum towards the recent high of 1,342 in the near term, if it sustains at above the 10-day SMA. Beyond that, it will rechallenge the 1,352.5 high recorded in May, which will then boost the medium-term outlook on the FKLI. However, a strong follow-through buying momentum is still required today, to avoid a sudden plunge on the trading sentiment. If not, selling may return to press the futures index lower to below the 10-day SMA and to cover the technical gap created recently. Further support is seen near the 40-day SMA of 1,304, closer to the 1,300 psychological level.

Daily Trading Strategy:

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Yesterday’s clearance of the 10-day SMA marks a confirmation for further technical recovery ahead. Still, the FKLI must sustain at above the 10-day SMA to prolong this rebound, in our view. Meanwhile, the futures index is projected to swing from 1,310 to 1,324 today.

Table 3: FKLI Closings FKLI (Month) Contracts Open Jul 10 1319.00 Aug 10 1319.00 Sep 10 1316.50 Dec 10 1317.50 Source: Bursa Malaysia

High 1322.50 1321.50 1320.50 1317.50

Low 1315.00 1314.50 1315.00 1315.50

Close 1316.50 1314.50 1316.00 1315.50

Chg (Pts) 12.00 11.50 12.50 11.50

Settle 1316.50 1314.50 1316.00 1316.00

Volume 5578 298 157 6

Open Interest 16243 267 538 244

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9 July 2010

Chart 5: US Dow Jones Industrial Average (DJIA) Daily

Chart 6: US Nasdaq Composite Daily

US Market Leads:

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As the bulls charged forward, the US stocks expanded its rally for a third day on Thursday, buoyed by a fall in jobless claims as well as improved June sales data from most of the retailers. According to the US Labour Department, initial claims for jobless benefits dropped by 21,000 to 454,000 in the week ended July 3, exceeding the expectation of a 12,000 decline. Retailer, Abercrombie & Fitch surged 7.8% after same-store sales rose 9%, beating expectation of 5.5%. Limited Brands advanced 2.2% after its sales increased 6%. Also, investors reacted positively to the IMF’s hike on the 2010 global economic growth forecast. In response to a decline in the US crude inventories and jobless claims, the US light sweet crude oil futures for August delivery rose another US$1.37 or 1.8% to US$75.44/barrel.

Technical Interpretations: Dow Jones Industrial Average (DJIA)

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As buying momentum revived in late session, the US DJIA pushed for further gain by posting another solid 120.71 pts or 1.20% gain, ending at 10,138.99 on Thursday. With that, it has successfully crossed above the 21-day SMA of 10,124 with a third bullish candle on the chart. Technically, the solid closing with an uptick on the 21-day SMA points to further upside ahead. But as we stressed earlier, the DJIA must cross above the immediate resistance of 10,150 to confirm a meaningful technical rebound towards the recent high of 10,594.16 and the major hurdle at 10,850. If it fails, profit-taking pressure could reemerge quickly with the immediate supports seen at the 21-day SMA and the 10,000 psychological level.

Nasdaq Composite (Nasdaq)

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The Nasdaq Composite index added 15.93 pts or 0.74% to 2,175.40 yesterday on follow-through buying support. Chart wise, it recorded a “doji-like” candle, indicating the current rebound could take a pause. Still, based on the recent buoyant recovery strength, it is still capable to retest the 2,190 level and to close a technical gap near the 21-day SMA of 2,211 soon. Immediate support is now at 2,100, followed by the 2,000 level.
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9 July 2010

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

Magna Prima (7617) Still need to remove RM0.87 and the 40-day SMA of RM0.86 to turn bullish…

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The share price of Magna kicked off a powerful rebound after breaking out from the sideways consolidation trend at between RM0.485 and RM0.60 in Nov 2009. The stock rallied across the RM0.87 level in Jan 2010 and hit a high of RM1.05 in early Feb 2010, prior to a profittaking phase where it congested around the region of RM0.87 to RM1.05. In late Mar 2010, after it failed its second attempt to cross the RM1.05 tough hurdle, it fell lower to below the 10day and 40-day SMAs, prompting a series of selling waves since Apr 2010. During that period, the stock’s 10-day SMA has fallen to below the 40-day SMA, indicating a medium-term bearish signal on the chart. Its technical outlook continued to deteriorate in Jun, when it gave up the key support at RM0.87. However, in recent trading, after hitting a low of RM0.73, the stock launched a strong technical rebound, rallying for three straight days in a row, reclaiming the RM0.75 level and closed near the RM0.87 support-trun-resistance level at RM0.855 yesterday. Sealed with “Three White Soldiers” candle, and the reversal signals on the momentum indicators, the sotck is due to stage further climb in the near term. However, given a tough overhead resistance at RM0.87, and the 40-day SMA near RM0.86, its technical outlook has yet to turn bullish, in our view. It must first secure these hurdles, before it can move into the RM0.87 – RM1.05 higher trading range.

Technical Readings:

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10-day SMA: 40-day SMA: Support: Resistance:

RM0.81 RM0.862 IS = RM0.75 IR = RM0.87 S1 = RM0.60 R1 = RM1.05 S2 = RM0.485 R2 = RM1.15

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9 July 2010

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. 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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. securities, subject to the duties of confidentiality, will be made available upon request. Additional information on recommended

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