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

13 August 2010
MARKET DATELINE

Market Technical Reading

To Salvage The Uptrend, The FBM KLCI Must Retake 1,350…

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

Local Market Leads:

♦ The FBM KLCI recouped part of its early losses in late session on the back of mild regional recovery, though it still
ended at slightly below the 1,350 key level.

♦ Earlier, the local benchmark fell as much as 10.80 pts, in tandem with the sharp selloff across Asian regional
markets following a 265-pt plunge on the overnight US DJIA on fears of a global economic slowdown.

♦ But as regional markets began to recover in the afternoon session on an early rebound in the European markets,
the FBM KLCI trimmed its losses to end the day at 1,349.33, losing merely 3.58 pts or 0.26%.

♦ Nikkei 225 recovered strongly from its day low and ended the day losing only 0.86%. India’s Sensex reversed its
early losses of about 0.86% to end the day marginally higher with 0.02% gain.

♦ Backed by bargain-hunting activities on selective stocks like Mieco (+17sen), P&O (+18sen) and Jerneh (+15sen),
turnover improved mildly to 798m shares. However, market breadth stayed negative with 383 decliners topping
298 advancers.

Technical Interpretations:

♦ After falling to the 1,342.08 low, the FBM KLCI kicked off a steady recovery, ending the day significantly off its day
low, thanks to the return of mild bargain-hunting support.

♦ On the chart, it acquired a “hammer-like” candle suggesting a potential technical rebound if sellers slow down their
activities today.

♦ Plus a fresh “buy” signal on the stochastic oscillators, it is likely to trade at above 1,350 today. Therefore, the next
challenge will be to sustain at above 1,350 to regenerate a further rebound momentum.

♦ Still, in our view, this is not enough to return to the previous bullish sentiment. The FBM KLCI must recapture the
10-day SMA near 1,360 to lure back the supportive buying momentum.

♦ The lower support is seen near the 40-day SMA of 1,337.

Please read important disclosures at the end of this report.

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Daily Trading Strategy:

♦ Technically, yesterday’s “hammer-like” candle suggests a potential technical rebound ahead.

♦ Coupled with the positive “buy” signal on the stochastic oscillators, the FBM KLCI should open higher than the
1,350 level today.

♦ Should the index manages to sustain at above the 1,350 level, it will retest the 10-day SMA of 1,360 in the near
term.

♦ However, if it fails to recapture the 1,350 level today, it will mean the index has triggered a major bearish
technical reversal signal on the chart.

♦ Not only that, the market needs to register a healthy turnover of between 800m and 1.0bn shares to sustain any
recovery attempt in the near term.

♦ Failure to meet these requirements will jeopardise its chances to resume the recent uptrend going forward.

♦ A mild support is seen near the 40-day SMA of 1,337, while a stronghold is expected near the psychological level
at 1,300.

Table 2 : Major Indices & Commodities

Table 1 : Daily Statistics Change Change
Scoreboard 6 Aug 9 Aug 10 Aug 11 Aug 12 Aug Local Key Indices Closing
(Pts) (%)
Gainers 328 293 255 207 298 FBM KLCI 1,349.33 -3.58 -0.3
Losers 367 402 409 464 383 FBM 100 8,883.00 -25.76 -0.3
Unchanged 281 256 281 279 261 FBM ACE 3,822.33 17.49 0.5
Untraded 390 416 421 424 431 Major Overseas
Indices
Market Cap Dow Jones 10,319.95 -58.88 -0.6
Turnover Nasdaq 2,190.27 -18.36 -0.8
(mln shares) 866 699 676 770 798 S&P 500 1,083.61 -5.86 -0.5
Value (RM FTSE 5,266.06 20.85 0.4
mln) 1,256 1,066 1,133 1,170 1,088 Hang Seng 21,105.71 -188.83 -0.9
Jakarta Composite 3,025.64 -9.68 -0.3
Currency Nikkei 225 9,212.59 -80.26 -0.9
MYR vs US Seoul Composite 1,721.75 -36.44 -2.1
Dollar 3.1460 3.1405 3.1495 3.1710 3.1830 Shanghai Composite 2,575.48 -32.02 -1.2
SET 862.16 Closed Closed
Source: RHBInvest & Bloomberg Straits Times 2,927.04 -22.22 -0.8
Taiwan Weighted 7,829.79 -65.24 -0.8
India Sensex 18,073.90 3.71 0.0
Major Commodities
NYMEX Crude Oil
(US$/barrel) 75.74 -2.28 -2.9
MDEX CPO – Third
Month (RM/metric ton) 2,673.00 -3.00 -0.1
US Interest Rate Current Last Updated
10 Aug
Overnight Fed Fund Rate 0-0.25% Unch
2010
Next FOMC meeting 21 Sep 2010

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Chart 3: FKLI Daily Chart 4: FKLI Intraday

Technical Interpretations:

♦ Aided by the afternoon rebound in the regional sentiment, the local futures index staged a late recovery on
Thursday.

♦ After hitting a 3-week low of 1,338.0, on the dot of the 40-day SMA, the FKLI began to rebound on fresh bargain-
hunting activities.

♦ Upon closing, the FKLI for Aug contract eased merely 1.50 pts or 0.11% to 1,346.00.

♦ Technically, as it failed to recover to above the resistance-turn-support level of 1,350, plus the weak short-term
momentum indicators, the chart outlook remains negative for the immediate term.

♦ However, given a positive candle registered at above the 40-day SMA, chances are that it could attempt to kick off
further rebounds in the coming sessions.

♦ But first, the futures index must regain above 1,350 and the 10-day SMA of 1,360 to confirm a bullish reversal on
the recent trend.

♦ On the downside, its immediate support is near the 40-day SMA of 1,338, followed by a huge technical gap at
1,307.5 – 1,315, near the key 1,300 level.

Daily Trading Strategy:

♦ Technically, as long as the FKLI stays below 1,350, its technical outlook will remain in the negative zone.

♦ However, this view will change if it removes the 1,350 and the 10-day SMA of 1,360 soon.

♦ For now, traders should stay cautious, on fear of further breakdown on the technical outlook.

♦ We expect the FKLI to swing from 1,340 to 1,351 today.

Table 3: FKLI Closings

FKLI (Month)
Contracts Open High Low Close Chg (Pts) Settle Volume Open Interest
Aug 10 1340.50 1350.50 1338.00 1346.00 -1.50 1346.00 7734 17724
Sep 10 1340.50 1350.00 1338.00 1344.00 -3.00 1344.00 599 772
Dec 10 1341.00 1350.00 1338.00 1345.50 -1.00 1346.50 151 285
Mar 11 1343.00 1349.00 1341.00 1348.00 0.50 1348.00 18 161

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:

♦ Weighed down by a surprise increase in jobless claims as well as a gloomy forecast by a tech bellwether, Cisco
Systems, the overnight Wall Street extended its correction leg for the third straight day on Thursday.

♦ According to the US Labour Department, weekly jobless claims rose by 2,000 to 484,000 last week, touching its
highest level since mid-Feb. This in turn, fuelled worries that the US economic recovery pace could have stalled.

♦ Cisco’s share price skidded 10% after its CEO John Chambers warned of "unusual uncertainty" in the US economy
and as its quarterly revenues missed expectations. This resulted in a sharp decline in tech stocks on fears that
tech spending will slow down.

♦ On the NYMEX, the US light sweet crude oil futures for Sep delivery took another hard beating, sliding another
US$2.28 or 2.9% to US$75.74/barrel amid disappointment over the recent weak economic data.

Technical Interpretations:

Dow Jones Industrial Average (DJIA)

♦ Underscored by continuous selling momentum, the US DJIA gapped down and continued to head south by falling
58.88 pts or 0.57% to 10,319.95 yesterday.

♦ Added with a third negative candle on the chart, and the poor negative momentum readings, it appears that
further declines could be underway.

♦ In other words, it could retest the 10,150 important support and the 10,000 psychological level in the near term
on follow-through selling pressure.

♦ On the other hand, even if it attempts to rebound, the 21-day SMA near 10,455 will likely limit its upside.

Nasdaq Composite (Nasdaq)

♦ In contrast, after losing the 2,190 support level to hit a low of 2,163.07, the Nasdaq Composite index managed to
pare down its early sharp decline to end at 2,190.27. For the day, it lost 18.36 pts or 0.83%.

♦ And despite the losses, it could stage a further recovery today, judging from its ability to chalk up a positive
candle to defend its crucial support of 2,190.

♦ On the upside, its immediate resistance is at a technical gap at 2,204.94, followed by a higher gap at 2,261.50
near the 21-day SMA of 2,255. But if the index fails to rebound from 2,190, this will accelerate its downside
corrections towards 2,100 and the Jul’s low of 2,061.14.

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Daily Technical Watch:

Chart 7: AZRB Daily Chart 8: AZRB Intraday

Ahmad Zaki Resources (7078)

Potential technical rebound if it sustains at above the 10-day SMA…

♦ The share price of AZRB halted its uptrend after hitting a high of RM1.05 in Aug 2009.

♦ With an immediate resistance level of RM1.05, the stock drifted sideways in a consolidation move throughout the
months of Aug 2009 to May 2010.

♦ Its technical momentum began to lose steam when it lost the key support level at RM0.85. The downswing
dragged the stock to a low of RM0.74 by late May 2010.

♦ Although it managed to stabilise at above the RM0.77 support region in Jun, it was not until in mid-Jul that the
stock launched a meaningful technical rebound.

♦ It pierced through the RM0.85 level and headed to a high of RM0.985 in early Aug, before a profit-taking move
that sunk off the resistance level of RM0.98.

♦ But, after congesting at the key supportive 10-day SMA near RM0.89 yesterday, it collected a “bullish engulfing”
candle on the chart, indicating a possible rebound today. It closed the day at RM0.905.

♦ Technically speaking, if it sustains at above the 10-day SMA in the near term, it could trigger a technical rebound
to retest the RM0.98 resistance level on follow-through buying support.

♦ Beyond RM0.98 will see a rechallenge to the Aug 2009 high of RM1.05.

♦ A stronghold below the 10-day SMA is seen near the RM0.85 resistance-turn-support level.

Technical Readings:

♦ 10-day SMA: RM0.8885

♦ 40-day SMA: RM0.8235

♦ Support: IS = RM0.85 S1 = RM0.77 S2 = RM0.67

♦ Resistance: IR = RM0.98 R1 = RM1.05 R2 = RM1.20

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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.

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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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