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

24 May 2010
MARKET DATELINE

Market Technical Reading

Strong Support-turn-resistance Level At 1,300...

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

Local Market Leads:

♦ Knocked down by a 376-pts plunge in the overnight US DJIA amid growing worries that the Eurozone debt crisis
would halt the global economic recovery, the FBM KLCI fell further on broad-based selling on Friday.

♦ Led by heavy sell off on heavyweights like banking stocks, the FBM KLCI tumbled 18.43 pts or 1.41% to 1,285.73,
extending its losing streak for a sixth trading day.

♦ Overall trading sentiment remained bearish, even as most of the regional indices recovered mildly in the
afternoon on news that the US Senate has passed the financial overhaul legislation in late Thursday as well as a
rebound in the euro.

♦ But with the European markets remaining weak, selling activities in the local market remained strong late last
week.

♦ Total volume traded increased to 886m shares, higher than 765m shares a day earlier, while market breadth was
extremely bearish. Losers topped gainers by 678 to 145.

Technical Interpretations:

♦ As expected, the FBM KLCI gapped down to below the major psychological support at 1,300 upon opening, hitting
1,280.63 low (-23.53-pts), before bouncing off to end Friday with another bearish candle.

♦ Despite the fact that both short-term momentum readings were very oversold, the current bearish readings still
have legs to go lower, especially after losing 1,300 on Friday, in our view.

♦ On strong follow-through selling activities, the FBM KLCI is expected to retest the immediate technical support
level of 1,250, before heading towards 1,200, the next important psychological level.

♦ For now, any attempt to stage a technical rebound will see significant hurdle at the 1,300 psychological level,
before retesting the main bearish trigger point near the 10-day and 40-day SMAs at 1,327 and 1,333.

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 24 May 2010

Daily Trading Strategy:

♦ Due to the latest technical breakdown to below the important psychological threshold of 1,300 last Friday, the
FBM KLCI has confirmed a bearish medium-term outlook on the technical chart.

♦ Not only that, the weak closing with another bearish candle suggests that it is well underway to revisit the lower
immediate support level of 1,250 soon.

♦ Should 1,250 give way to sellers, it will only see a meaningful support near the next psychological level at 1,200.

♦ Having said that, with a triple-digit bounce on the US DJIA on last Friday, a mild rebound may appear on bargain-
hunting activities today.

♦ Still, we remain bearish on the overall market direction, as we believe the rebound, if any will unlikely to be
sustainable, and that it should meet a strong support-turn-resistance level at 1,300.

♦ Overall, we foresee investors to “sell into strength” as the market has moved into a retracement phase.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 17 May 18 May 19 May 20 May 21 May Local Key Indices Closing
(Pts) (%)
Gainers 187 336 135 250 145 FBM KLCI 1,285.73 -18.43 -1.4
Losers 557 295 689 449 678 FBM 100 8,407.18 -124.10 -1.5
Unchanged 194 287 175 274 169 FBM ACE 3,836.73 -89.38 -2.3
Untraded 439 460 379 405 384
Major Overseas
Market Cap Indices
Turnover Dow Jones 10,193.39 125.38 1.2
(mln shares) 633 691 782 765 886 Nasdaq 2,229.04 25.03 1.1
Value (RM S&P 500 1,087.69 16.10 1.5
mln) 1,009 1,144 1,403 1,415 1,764 FTSE 5,062.93 -10.20 -0.2
Hang Seng 19,545.83 Closed Closed
Currency Jakarta Composite 2,623.22 -71.03 -2.6
MYR vs US Nikkei 225 9,784.54 -245.77 -2.5
Dollar 3.2265 3.2100 3.2510 3.2720 3.3180 Seoul Composite 1,600.18 Closed Closed
Shanghai Composite 2,583.52 27.58 1.1
Source: RHBInvest & Bloomberg SET 765.54 Closed Closed
FT Straits Times 2,701.20 -52.31 -1.9
Taiwan Weighted 7,237.71 -186.72 -2.5
India Sensex 16,445.61 -74.07 -0.4
Major Commodities
NYMEX Crude Oil
(US$/barrel) 70.04 -0.76 -1.1
MDEX CPO – Third
Month (RM/metric ton) 2,491.00 15.00 0.6
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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 24 May 2010

Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ With panic selling sweeping across the board following an overnight crash in the US markets, the KL futures
market finally broke below the 1,300 psychological level on an extended correction mode on Friday.

♦ Although the FKLI recovered to 1,292.50 high at one stage in response to a rebound in the US futures market
and the Shanghai Composite index, sellers returned towards the late sessions.

♦ For the day, the FKLI for May contract slid 17.00 pts or 1.30% to end at 1,286.50.

♦ Nonetheless, it acquired a potential “morning star” candle on the chart, implying a possible technical rebound
today.

♦ But, judging from the significant breakdown pattern from 1,300 last Friday, the risk remains high that the futures
index could see an extension of the bearish selling momentum in the near term.

♦ And given the depressed short-term momentum readings on the chart, it will be hard to see a reversal in the
current trading sentiment, in our opinion.

♦ To recap, the loss of 1,300 would pave ways for a further correction towards 1,270. But we believe a stronger
support is only seen at 1,200, a lower pshychological level.

♦ As a result, its immediate resistance has been revised lower to 1,300, followed by the 10-day and 40-day SMAs
near 1,325 and 1,333.

Daily Trading Strategy:

♦ In line with our expectation, the FKLI finally lost 1,300 to confirm a bearish medium-term view on its chart.

♦ A further retracement is now targeted at 1,270 and 1,200, while any rebound attempt will be capped at 1,300.

♦ We expect the FKLI to move within a range of 1,270 to 1,290.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
May 10 1282.00 1292.50 1277.00 1286.50 -17.00 1286.50 12256 20866
Jun 10 1287.00 1291.00 1276.00 1284.00 -18.50 1284.00 2155 2061
Sep 10 1284.00 1290.00 1275.50 1283.00 -21.00 1282.00 190 322
Dec 10 1286.00 1290.00 1277.00 1285.00 -19.50 1285.00 85 214

Source: Bursa Malaysia

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 24 May 2010

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

US Market Leads:

♦ After losing the 10,000 level at one stage, the US markets launched a steady recovery on renewed bargain-
hunting support on Friday, after the US Senate has approved the financial regulation legislation.

♦ Also, news that Germany's parliament has approved a bill to allow the country to contribute to financial aid for
Greece and other indebted euro zone nations eased worries on the Eurozone debt problems.

♦ However, the financial reform bill, which involves a set up of a new consumer regulatory agency with restrictions
on proprietary trading by banks, must be reconciled with a measure approved in Dec by the House of
Representatives before it can be sent to President Obama to sign by July 4.

♦ Nonetheless, financial stocks rallied the most, with JPMorgan and Bank of America rallying 5.9% and 4.7%
respectively.

♦ Meanwhile, the US light sweet crude oil futures for July delivery fell US$0.76 or 1.1% to US$70.04/barrel.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ As bargain-hunters returned, the US DJIA bounced back strongly from 9,918.82 intraday low, rising 125.38 pts or
1.25% to 10,193.39 on Friday.

♦ By ending with the first positive candle in four trading days, plus a fresh marginal “buy” signal on the stochastic
oscillators, the index could extend its rebound if the buying continues today.

♦ And if it can hold at above 10,150, it could climb back onto the previous consolidation range of 10,150 – 10,850.

♦ However, if it fails to sustain at above 10,150, the selling activities will repeat, hence prerssing the index to the
next support region of 9,200 – 9,700.

Nasdaq Composite (Nasdaq)

♦ The Nasdaq Composite Index jumped 25.03 pts or 1.14% to 2,229.04, a sharp reversal from a day low of
2,165.79 - its lowest level since mid-Feb 2010.

♦ The index could extend its rebound, as it formed a “bullish piercing line” candle on the chart, added with an
uptick on both short-term momentum indicators.

♦ Still, we see limited upside ahead, with strong immediate hurdles at a technical gap near 2,270.62 and 2,330.

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

Hai-O Enterprise (7668)

Selling momentum to persist in the coming week…

♦ The buying activities on HaiO turned aggressive when the stock rebounded from the congested 10-day and 40-
day SMAs region near RM2.00 in Sep 2009.

♦ The upswing led a test to the RM3.20 hurdle, but a pullback dragged the stock back to RM2.59, before recharging
its momentum, and formed the Uptrend Line (UTL) on the chart.

♦ Since then, the stock has been rallying along the UTL and the 10-day and 40-day SMAs.

♦ However, after touching an all-time high of RM4.93 in Mar 2010, selling activities have increased, dragging the
stock off the 10-day SMA and the important support level at RM4.40 in Apr. The slide also caused the 10-day
SMA to cut below the 40-day SMA.

♦ As the selling intensified, the stock slipped below the UTL and eased to below the RM4.12 level in recent trading.
This has double-confirmed the medium-term bearish cut on the two SMAs.

♦ Moreover, as the stock closed lower than the early May low of RM3.83 on Friday, we expect selling momentum to
persist in the coming week. That also marks an imminent correction phase on the stock going forward.

♦ If it loses the immediate support at RM3.67, it will slide further towards the RM3.20 level before issuing its first
sign of stabilisation signal, in our opinion.

♦ Immediate technical hurdle will be seen near RM4.12 – RM4.40 region.

Technical Readings:

♦ 10-day SMA: RM4.015

♦ 40-day SMA: RM4.278

♦ Support: IS = RM3.67 S1 = RM3.20 S2 = RM2.59

♦ Resistance: IR = RM4.12 R1 = RM4.40 R2 = RM4.93

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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
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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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may from time to time have an interest in the securities mentioned by this report.

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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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actions of third parties in this respect.

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