This article first appeared in The Edge Financial Daily, on November 13, 2015.

US equity markets declined on Wednesday after investors took profits on energy-related and healthcare stocks as they weighed if the economy was growing well enough to weather higher interest rates as soon as December. The S&P 500 Index lost 7.48 points to 6.72 points while the Dow declined 55.99 points to end at 17,702.22. Weaker October China factory output data also dampened American sentiment.

In Malaysia, the FBM KLCI Index moved in a weaker range of 28.55 points for the week with lower volumes of 2.1 billion to 2.34 billion shares traded. The index closed at 1,663.2 on yesterday, down 2.12 points from the previous day as blue chip stocks like AMMB Holdings Bhd, Hong Leong Financial Group Bhd, IOI Corp Bhd, KL Kepong Bhd, PPB Group Bhd and Petronas Dagangan Bhd caused the index to decline on minor profit-taking activities. The ringgit was softer against the US dollar at 4.365 as Brent crude oil turned weaker to US$45.10 (RM196.75) per barrel as foreign fund selling emerged earlier on Wednesday. 

The index rose on a rally from a low of 801.27 (Oct 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 comprised 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), 1,774.3 (low), 1,867.53 (high), 1,685.03 (low), 1,744.19 (high), 1,503.68 (low), 1,691.93 (high), 1,595.22 (low) and 1,727.41 (high).

The index’s daily signals are mainly negative, with its CCI, DMI, stochastic and MACD indicators showing obvious “sell” signals. Its oscillator remains only marginally positive for now. As such, the index’s weaker support levels are seen at the 1,567, 1,595 and 1,657 levels, while heavy liquidation at the resistance areas of 1,663, 1,696 and 1,727 will cap any index advances.

The FBM KLCI’s 18-day and 40-day simple moving averages (SMA) depict an emerging downtrend for its short-term daily chart. The index’s price bars are now between the 50-day and 200-day SMA. This depicts a neutral phase for the FBM KLCI in the medium term.

Due to the softer tone for the FBM KLCI Index, we are recommending a chart “sell” on CIMB Group Holdings Bhd (CIMB). A check on the Bloomberg consensus reveals that 24 research houses cover the stock, with six “buy” calls, 11 “hold” calls and seven “sell” calls.

Maybank Investment Bank Bhd’s analyst has a “hold” call on CIMB with a target price of RM4.90. PT CIMB Niaga Tbk’s third quarter 2015 (3Q15) net profit (excluding its mutual separation scheme costs) rebounded to 442 billion rupiah (RM142 million) from 93 billion rupiah in 2Q15, lifting the nine months 2015 net profit to 618 billion rupiah (-73% year-on-year). The results were below expectations, as provision levels remained elevated. If not for the sale of bad loans to a special purpose vehicle, the bank’s gross non-performing loan ratio would have risen quarter-on-quarter. Its special mention loans’ ratio jumped to 8.26% in end-September from 6.1% at end-June and the weakness in repayments was across all key segments.

CIMB’s chart trend on the daily, weekly and monthly time frames is very firmly down. Its share price made an obvious plunge since its major monthly Wave-5 and all-time high of RM8.20 in May 2013. Since that high, CIMB fell to its recent August 2015 low of RM4.45.

As prices broke above its recent key critical support levels of RM5.50 and RM5.82, look to “sell” CIMB on any rallies to its resistance areas as the moving averages depict a very firm short- to long-term downtrend for this stock. 

The daily, weekly and monthly indicators (like the CCI, DMI, MACD oscillator and stochastic) have issued clear “sell” signals and now show firm and obvious indications of CIMB’s eventual decline towards lower levels. It would attract firm selling activities at the resistance levels of RM4.58, RM5.50 and RM5.82. We expect CIMB to witness weak buying at its support levels of RM4.03, RM4.22 and RM4.45. Its downside targets are located at RM4.36, RM4.23, RM3.19 and RM3.

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.