Palm | Kelapa Sawit

While the rebound last week offers some hope, tumbling US and European markets last Friday sparked by stagnating August employment numbers in the US, which renewed recession fears, would set a negative tone this week.

Thus, expect fresh downside volatility with any near-term strength likely to be matched with keen selling interest, as investors look to reduce stock holdings. So, stay defensive and look to sell on strength.

Chart wise, only buy into sharp dips to stronger retracement supports on blue chips such as AirAsia, CIMB, Gamuda, Genting Bhd, IOI Corp, RHB Capital, Sime Darby and TM.

In the meantime, the local index must hold above the crucial pivot low support at 1,423.47 on August 9, which is reinforced by 1,420, the 50 per cent Fibonacci Retracement (FR) of uptrend from the 1,243 low of May 27 2010 to the 1,597.08 record high of July 11, to prevent a deeper correction to 1,378, the 61.8 per cent FR, with next significant retracement support at 1,327, representing the 76.4 per cent FR.

Immediate upside hurdles stays at 1,490 and 1,510, the respective 38.2 per cent FR and 50 per cent FR levels of the sell-off from the 1,597.08 record high to the recent extreme low of 1,423.47, with the formidable hurdle staying at 1,530, the 61.8 per cent FR matching the 200-day moving average.