Jakarta, CNBC Indonesia – The Jakarta Composite Index (JCI) posted a gain of almost 1% to 5,103,414 over the past week. The JCI has also successfully booked 2 consecutive weeks of strengthening, with a total percentage of 3.6%.
JCI strengthening could be even sharper, had it not been corrected in the last 2 trades.
Various positive sentiments came from within the country last week, ranging from the easing of Large-Scale Social Restrictions (PSBB) in DKI Jakarta, the mega merger of 3 Islamic State-Owned Enterprises (BUMN) to Bank Indonesia (BI) which predicts current transactions (current account) which will record a surplus for the first time in nearly a decade.
In addition there are also reports of two battery manufacturers electric vehicle The world‘s largest (EV) is currently interested in joining Indonesia’s nickel downstream plan through the construction of an EV battery factory.
The electric vehicle battery factory project is estimated to be worth US $ 20 billion.
BUMN Minister Erick Thohir said the two companies were Contemporary Amperex Technology Co. Ltd (CATL) from China and LG Chem Ltd from South Korea.
This series of good news made the JCI to book strengthening for 8 consecutive days until Wednesday (14/10/2020), the longest rally in the last 1 year. During that period, the JCI recorded a 5.06% increase.
This sharp increase made the JCI hit by profit-taking (profit taking) which made JCI weakened in the last 2 trading days.
Meanwhile, today, Monday (19/10/2020), the JCI has the opportunity to go up again because the sentiment of market players is good, as seen from the stock futures market (futures) United States (US) which strengthened this morning, as well as several Asian bourses that have opened.
In addition, market players are also waiting for the release of data on China‘s economic growth, which may show a V-shape recovery after slumping in the first quarter of 2020. Based on data from Refinitiv, China‘s economy is predicted to grow 5.2% year-on-year (YoY) in the third quarter of 2020, higher than the previous quarter’s 3.2% YoY.
The rapid growth of China‘s economy can illustrate that the economy can immediately rise after the corona virus disease (Covid-19) pandemic has been stopped, which is certainly a positive sentiment in the market.
Technically, the Stochastic indicator on the daily chart which was in the overbought area yesterday was the trigger for JCI correction.
Stochastic is a leading indicator, or indicator that initiates price movements. When Stochastic reaches the territory overbought (above 80) or oversold (below 20), then the price of an instrument has a chance to reverse.
Graphic: Daily IHSG
Stochastic on the daily chart is still in the region overbought, so there is still a risk that the correction will continue.
IHSG is currently below the 50-day moving average (moving average/ MA50) indicated by the green line. MA 50 is in the range of 5,115 to 5,120 as long as it stays below it, JCI is at risk of weakening towards 5,065.
Graph: IHSG 1 Hour
Meanwhile, if it manages to return above 5,120, JCI has the opportunity to strengthen back towards the range of 5,163 which becomes strong resistance because it is a 50% Fibonacci retracement.
It pulled from a September 2019 high of 6,414 to this year’s weakest level of 3,911 on the daily chart.
CNBC INDONESIA RESEARCH TEAM
(pap / pap)