THE US markets ended slightly higher on Wednesday after the latest US Federal Reserve Bank minutes were released. Despite an almost even number of committee members of the Fed who were divided over the timing of US interest rate increase, the American markets inched up. The S&P 500 index gained 5.57 points to 2,081.90 points while the Dow rose 27.09 points to end at 17,902.51. 

In Malaysia, the FBM KLCI moved in a narrow range of 19 points for the week with lower volumes of 1.8 billion to 1.99 billion traded. The index closed at 1,849.39 yesterday, down 0.92 points from the previous day as blue chip stocks like KLK Bhd, PPB Group Bhd, Public Bank Bhd, UMW Holdings Bhd and Telekom Malaysia Bhd caused the index to decline on some minor profit-taking activities. The ringgit was firmer against the US dollar at 3.6305 as Brent crude oil remained steady at US$55.80 (RM202.55) per barrel. 

The index rose on a rally from the 801.27 low (October 2008) to its 1,896.23 all-time high (July 2014) and it represents an extended Elliott Wave “Flat” rebound in a “Pseudo-Bull” rise completed. The next few months’ index price movements since July 2014 had key swings of 1,837.28 (low), 1,879.62 (high), 1,766.22 (low), 1,858.09 (high), 1,671.82 (low), 1,810.21 (high), 1,706.18 (low), 1,831.41 (high) and 1,774.3 (low).

Most of the index’s daily signals are positive at the moment, with its CCI, DMI, MACD and Oscillator indicators showing upbeat readings. As such, the index’s obvious support levels are seen at 1,795, 1,831 and 1,849-points, while the resistance areas of 1,858, 1,879 and 1,896 will cap the index’s rise.

The FBM KLCI’s 18 and 40 simple moving averages (SMA) depict a good uptrend for its daily chart. The recent price bars of the index are now also above the 50 and 200 SMA and is also positive on that front. With this, the index has taken on a more much positive tone recently.

Due to the better tone for the FBM KLCI, we are recommending a chart “buy” on Oriental Food Industries Holdings Bhd (OFI). Looking at its recent third quarter financial year 2015 (3QFY15) results announcement, OFI recorded a small revenue growth of 3% to RM63.3 million from RM61.4 million for the preceding quarter in the same period. The higher revenue was attributed to firmer demand from customers in the snack food and confectionery segment. Correspondingly, profit before tax for 3QFY15 was higher from the improved revenue and also from foreign exchange gains as well as lower administration and finance costs in the current quarter.

The board of OFI expects the performance of the group to be satisfactory for 4QFY15. A check of Bloomberg consensus reveals that no research house covers the stock. This stock currently trades at a historical price-earning ratio of 17.1 times while its price-to-book value of 1.94 times indicates that its share price is trading at a premium to its book value. 

OFI’s chart trend on the daily, weekly and monthly time frame is very firmly up. Its share price made a good surge since its major weekly Wave-2 low of RM1.05 in September 2011. Since that RM1.05 low, OFI surged to its April 2015 recent all-time high of RM4.99. As prices broke above its recent key critical resistance levels of RM4.31 and RM4.38, look to buy OFI on any dips to its support areas as the moving averages depict very firm short- to long-term uptrends for this stock. 

The daily, weekly and monthly indicators (like the CCI, DMI, MACD, Stochastic and Oscillator) have issued “buy” signals and now depict very firm indications of OFI’s eventual surge towards much higher levels. It would attract firm buying activities at the support levels of RM4.31, RM4.38 and RM4.98. We expect OFI to witness some profit-taking at its resistance area and all-time high of RM4.99. Its upside targets are located at RM5.91, RM6.55, RM9.15 and RM9.88.

Lee Cheng Hooi is the regional chartist at Maybank Kim Eng. The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgment or seek professional advice for your investment decisions. Technical report appears every Wednesday and Friday.

This article first appeared in The Edge Financial Daily, on April 10, 2015.