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

18 May 2010
MARKET DATELINE

Market Technical Reading

The Short-term Bearish Sign Still Sound...

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

Local Market Leads:

♦ Pressured by another wave of strong sell off across the Asian region amid worries that aggressive measures to
cut the deficit in European countries would derail the region’s economic growth, Bursa Malaysia extended its
losing streak for a second day on Monday.

♦ Talks of a possible breakup of the EU also caused jitters among regional investors on escalating fears that the
current debt crisis could deepen. The US$/EUR pair once dropped to 1.2233, its lowest level since Apr 2006.

♦ As a result, most Asian markets posted loss of more than 2% including Shanghai Composite which plunged
5.07% and Hang Seng which slid 2.14%.

♦ But as local investors tracked a firm rebound in the early European markets, the FBM KLCI trimmed its losses to
only 5.03 pts or 0.38% to 1,334.27 from an early loss of 12.3 pts.

♦ Turnover for the day merely reached 633m shares compared to last Friday’s 682m shares. Market breadth stayed
under pressure with decliners overwhelming advancers by a ratio of 3 to 1.

Technical Interpretations:

♦ As selling continued, the FBM KLCI extended its losing streak to clearly below the critical 10-day SMA of 1,338
and the 40-day SMA of 1,334 early yesterday.

♦ However, thanks to the afternoon recovery, the index ended the day on the dot of the 40-day SMA, with a
“hammer-like” candle, which could pave the way for a quick rebound today.

♦ But given the other poor technical readings, any rebound would be weak and unsustainable, in our view.

♦ In fact, the index appears vulnerable to follow-through selling momentum today. The next downside target is at
the recent low of 1,315.63, followed by the 1,300 psychological level.

♦ For now, its immediate hurdle will remain tough at the 10-day SMA and the 1,347 – 1,350 resistance zone.

Please read important disclosures at the end of this report.

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 18 May 2010

Daily Trading Strategy:

♦ Even though the FBM KLCI chalked up a “hammer-like” candle to suggest a possible immediate-term rebound,
the momentum and other technical readings are pointing at the opposite direction.

♦ Coupled with the “double sell” signal on the short-term momentum indicators and the declining daily trading
volume, the FBM KLCI is poised for more retreat in the near term.

♦ As the index remains below the 10-day SMA, the negative short-term technical outlook and the “triple-top”
bearish formation on the chart remain intact.

♦ Any rebound, if it occurs, would be capped by the 10-day SMA of 1,338 and the tough resistance zone at 1,347 –
1,350.

♦ On the downside, losing the 40-day SMA of 1,334 will confirm another round of selling towards the recent low of
1,315.63, followed by the psychological level of 1,300.

♦ More importantly, investors should also beware of a possible “dead cross”, i.e. a fresh cut of the 10-day SMA to
below the 40-day SMA soon. This will trigger a medium-term bearish sign on the chart.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 11 May 12 May 13 May 14 May 17 May Local Key Indices Closing
(Pts) (%)
Gainers 302 362 396 293 187 FBM KLCI 1,334.27 -5.03 -0.4
Losers 399 241 253 371 557 FBM 100 8,736.09 -41.20 -0.5
Unchanged 272 291 285 260 194 FBM ACE 3,989.34 -24.77 -0.6
Untraded 400 478 443 453 439
Major Overseas
Market Cap Indices
Turnover Dow Jones 10,625.83 5.67 0.1
(mln shares) 782 667 906 682 633 Nasdaq 2,354.23 7.38 0.3
Value (RM S&P 500 1,136.94 1.26 0.1
mln) 1,344 934 1,040 1,084 1,009 FTSE 5,262.54 -0.31 0.0
Hang Seng 19,715.20 -430.23 -2.1
Currency Jakarta Composite 2,819.47 -38.92 -1.4
MYR vs US Nikkei 225 10,235.76 -226.75 -2.2
Dollar 3.2080 3.2030 3.1950 3.1835 3.2265 Seoul Composite 1,651.51 -44.12 -2.6
Shanghai Composite 2,559.93 -136.70 -5.1
Source: RHBInvest & Bloomberg SET 753.26 -15.53 -2.0
FT Straits Times 2,833.69 -21.52 -0.8
Taiwan Weighted 7,598.72 -173.41 -2.2
India Sensex 16,835.56 -159.04 -0.9
Major Commodities
NYMEX Crude Oil
(US$/barrel) 70.08 -1.53 -2.1
MDEX CPO – Third
Month (RM/metric ton) 2,425.00 -32.00 -1.3
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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 18 May 2010

Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ Despite a sharp rebound in the late session amid strong recoveries in major European markets, the FKLI still
finished lower for a second day on Monday.

♦ During the day, the futures index posted a double-digit decline to 1,324.00 (-14-pts) low, but thanks to the late
recovery, the FKLI for May contract merely slipped 5.00 pts or 0.37% to 1,333.00.

♦ Similar to the local cash index, it ended with a potential “hammer” candle, indicating a likely rebound today.

♦ While this could signal a quick recovery ahead, we remain pessimistic on the short-term trend. The immediate-
term hurdle is near the 10-day and 40-day SMAs near 1,334. A higher resistance is at 1,352.50.

♦ Furthermore, the “double sell” signal on the momentum indicators, as well as yesterday’s breakdown to below the
10-day and 40-day SMAs have continued to dampen near-term trading sentiment in the local bourse.

♦ All these negatives have brought the index closer to a “dead cross” on the SMAs, which could trigger a bearish
medium-term “sell” signal on the FKLI.

♦ For that, we expect a solid psychological support near 1,300 to offer the first line of defence for the futures index
going forward.

Daily Trading Strategy:

♦ The FKLI may attempt to stage a mild rebound today, but most of the technical readings are pointing to further
downside ahead.

♦ Traders should remain bearish, with firm “shorting” strategy in the near term.

♦ We expect the FKLI to swing from 1,322 to 1,336 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
May 10 1331.00 1333.50 1324.00 1333.00 -5.00 1333.00 9964 20514
Jun 10 1331.50 1333.00 1324.00 1332.00 -6.00 1332.00 772 888
Sep 10 1332.50 1333.00 1325.00 1332.00 -6.50 1332.00 214 261
Dec 10 1333.00 1334.00 1326.00 1332.00 -6.50 1333.00 104 172

Source: Bursa Malaysia

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 18 May 2010

Chart 5: US Dow Jones Industrial Average (DJIA) Daily Chart 6: US Nasdaq Composite Daily

US Market Leads:

♦ Thanks to renewed bargain-hunting support in the afternoon, the US major gauges bounced back from the early
steep decline by ending slightly higher on Monday.

♦ Initially, investors extended their selling activities amid persistent fears that Europe’s austerity measures would
slow the economic growth in the Eurozone as well as the weak US manufacturing data and China’s leading
indicator, which suggest the latter’s growth might have peaked.

♦ Coupled with the continuous sell down in crude oil prices, this resulted in a broad-based selling in industrial and
commodity-related stocks.

♦ But as bargain-hunting activities returned in the afternoon, investors snapped up consumer stocks, like Wal-Mart
Stores and Target Corp ahead of their earnings reports this week.

♦ US light sweet crude oil futures for June delivery tumbled US$1.53 or 1.5% to US$70.08/barrel.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ After sliding as much as 184-pts at one stage, the US DJIA staged a strong reversal in the afternoon. For the day,
it inched up 5.67 pts or 0.05% to 10,625.83.

♦ This led to a formation of a “dragonfly doji” candle, suggesting a potential reversal could be on the cards.

♦ However, any bounce should be temporary and will be capped by 10,850 and the 21-day SMA of 10,924, due to
the depressed momentum signals overall.

♦ Instead, sellers should remain bearish and anticipate selling to resume soon. The lower band of the 10,150 –
10,850 consolidation range is likely to be broken upon another selldown, in our view.

Nasdaq Composite (Nasdaq)

♦ Likewise, the Nasdaq Composite Index ended up 7.38 pts or 0.31% to 2,354.23 yesterday, with a “dragonfly doji”
candle signalling a possible follow-through recovery towards a technical gap near 2,387.59 soon.

♦ However, the rebound is unlikely to be sustainable, as the strong hurdles near the 21-day SMA of 2,436 and
2,470 will limit its upside.

♦ For now, we pegged its immediate support at 2,330, followed by 2,190.

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

Kuala Lumpur Kepong (2445)

Take profit…

♦ The share price of KLK began its uptrend since Dec 2008, when the 10-day SMA cut to above the 40-day SMA
near RM7.50 region, and has seen trending along and above the 10-day and 40-day SMAs.

♦ The stock pierced through an important resistance level of RM15.40 in Dec 2009, as its rally geared into a final
stretch of the more-than-one-year old uptrend.

♦ It reached the toughest resistance level near RM17.00 since early Jan 2010, but has been unable to penetrate
this technical hurdle convincingly.

♦ After a recent test to an intraday high of RM17.20, the stock triggered a streak of selling activities.

♦ It recorded a bearish candle yesterday and ended below the 10-day and 40-day SMAs near RM16.65 and
RM16.71.

♦ Added with the negative short-term momentum readings on the indicators, the stock may see an extension of the
recent retreat from the RM17.00 barrier.

♦ If it falls to below the recent low of RM16.20, it will confirm a technical correction signal for the uptrend, aiming
to the lower supports at RM15.40 and RM13.60.

♦ Judging from the negative outlook, investors should consider taking profit near the clear resistance of RM17.00,
in our view.

Technical Readings:

♦ 10-day SMA: RM16.648

♦ 40-day SMA: RM16.709

♦ Support: IS = RM15.40 S1 = RM13.60 S2 = RM12.40

♦ Resistance: IR = RM17.00 R1 = RM17.80

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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.

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
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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.

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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