Monthly Archives: February 2013

Padini [7052]: Ready for a Huge Directional Move

Padini’s year-long uptrend was broken in September and had been on a downtrend since. The wide swings during the downtrend offered a number of opportunities to believers of short-term mean-reversion and experts in candlesticks pattern. The downtrend ended in early December after completing the falling 5-way sequence of the Elliot Wave and it’s share price has been moving sideway since.

Padini
The range which the share price has been trading for the past 3 months is tightening slowly and is converging at around the Fibonacci confluence zone of RM1.82. This is not surprising given that Fibonacci confluence zone, being the price level where multiple Fibonacci ratios align, has always been the level where price equilibrates in the medium term. The price movements of Padini for the past 1 year have successfully form a D-shape, which according to Robin Mesch signals the end of a cycle of market activity and the beginning of a new one. This essentially means that the share price is poised to make a huge directional move and it is expected to happen anytime soon given that price has been moving sideway for 3 months. Such time prediction is in accordance to Gann’s observation that “majority of trends occur in time period of 3 (3 days, 3 weeks or 3 months)”.

KLCI: Testing the Downtrend Line.

KLCI 25.2.2013
After testing the psychological support for the third time, our local index rose for 3 consecutive days. The low traded volume for the past 2 days indicates declining interest as the index move higher. Moving on, we need to observe whether the downtrend line will be broken. If it does, our index will move up to test the next resistance level at 1635. If you are holding a long position now, you may want to consider closing your position tomorrow as trend tends to get exhausted on its 3rd day. If you do not own a position and are eager to take one, this would be a good opportunity to short the index. Do not initiate a long contract at this juncture because the possibility of reversing is much higher.

 

Stock to Watch: CSL [5214]

When China Stationery Limited (CSL) was first listed in January 2012, there was a worry that it’s IPO will not perform well since local interest on china-based companies are generally low. Almost all of the shares of red chips were on a downtrend during the proposed listing of CSL (most are still on a downtrend or remain stagnant at a low level today). Investors are not willing to take risk in these companies mainly due to the unreliability of their financial data, thereby causing the share price to be traded at an abnormally low P/E (price-to-earnings ratio).

China-based companies listed in M'sia (PE)
But the strong 3-days upward movement on the first week of its listing and a subsequent wave that brought the share to its high of RM1.90 causes the general public to reconstruct their perception on this company, as can be seen from the spike in trading activities when the share price retraced from its high. Perhaps that is the intention behind the manipulation of the share price. The prior strong uptrend may be the work of syndicates so as to allow them to dispose their holdings at a favorable price to the optimistic investors when the share price retrace. If CSL is genuinely good and is really different from other China-based companies, it’s share price will not be traded at a depressed level today. Let’s look at the chart of CSL.

Update on Zhulian [5131]

I mentioned in my previous post on Zhulian that its price is expected to rebound once it reaches the RM2.53 level. Given the improved sentiment today, the price may not reach the RM2.53 level but instead rebound tomorrow since RM2.60 is itself a support level. The formation of a dragonfly doji with high volume and the creation of 8 new lows as counted from the 21st of January provide further signal of a possible reversal.

Stocks to Watch: Pwroot [7237], Spsetia [8664]

Pwroot

pwroot
This is pretty straight forward. After a consolidation of 2 months, Pwroot is poised to move again. RM1.27 is the level to watch closely as a break/ close above would send the stocks fly. If you are a fan of Bollinger Band (BB), the first buy signal would have appear on the 18th of February, when the share closed above its middle band. Today, a further buy signal can be seen as it closed above the upper band of the BB. The support is at RM1.22/ RM1.20.

Spsetia

Spsetia

Watch Spsetia closely as well as it is forming a pennant. Using the flagpole as an estimate, the stocks could shoot up by around 40cents and stop at around its previous high of RM3.78 in the event of a break-above. Immediate support is at RM3.39.

KLCI: An Up Thursday Maybe?

KLCI

While the short-term trend is still bearish, as indicated by the downward slopping trendline that connects all recent highs, KLCI may rebound slightly tomorrow and the day after. This prediction is not without a basis since a hammer with high volume is formed and risk-taking activities can be seen in a number of shares (I shall share some of the shares with bullish signal in another post). From a market anomalies perspective, Wednesday has proven to be a day with high possibility of reversal, especially if the direction of the price movement are the same from Monday to Wednesday. A green bar is not impossible since 20th of February is also one of the reversal dates according to Gann’s wheel.

Despite the bullishness in the immediate term, we have to be wary of the announcement of the dissolution of parliament as it could potentially send our market down towards the 15xx region. The continuation of the downtrend of our major telcos (Axiata, Maxis, Digi) could also offset any gains in other KLCI constituents, thereby dragging the CI down as they are among the top 7 companies by index sensitivity.

To conclude, its a 2-days GO for day-trader but a WAIT for others. If you are planning to take a position, make sure you keep your stop loss tight.

Stock to Watch: Zhulian [5131]

Given the strong track record of the company, coupled with its high dividend yield, Zhulian will definitely attract the attention of both the fundamentalists and technical analysts as it slides further. We need to be quick in determining the level of which the risk-reward ratio is low enough for us to take a comfortable position before it stages a rebound. To determine this level, we need to look at its supports and resistances (S/R).

Airasia [5099]: Looking Into The Shareholdings of Institutional Funds

In my previous post, I explained why I was expecting Airasia’s share price to drop to the RM2.50 or RM2.30/ RM2.20 level before rebounding. The development of the price movement in the past 2 weeks, however, had caused the formation of an inverse-head-and-shoulder increasingly likely. The small reversal on the 8th of February with increased volume could be a signal for trend change. The support level at RM2.63 seems plausible since it was the lowest level being traded when the market tumbled in 2011 (as highlighted in the chart).

airasia general

But is it a confirmed trend change, or could it be just a bear rally? To answer this question, we need to look deeper into the activities of both the institutional funds that are involved in this counter.

Predicting the Market using Feng Shui

A publication in the business column attracted my attention today – Year of the Water Snake Prediction. I have always knew that there are people who have been relying on FengShui, or particularly “Flying Stars” and “5 Elements”, in identifying investment opportunities around the world, but I never expect to see such kind of advice appear in the newspaper. In this post, we shall see whether the economic predictions based on Feng Shui are aligned with those predictions of research houses and my opinion on sectors to focus in 2013.

Stock to Watch: Airasia [5099]

AffinInvestment Bank has been giving a buy call on Airasia with a price target of RM3.70 (an upside of 37% from yesterday’s closing) ever since its share price was hammered from its July top due to (1) possible increase in competition from Malindo Airways, a joint venture between Malaysia’s National Aerospace and Defence Industry and Indonesia’s Lion Air which is expected to start operating in May this year, and (2) adjustment of funds as Airasia seize to become one of our index constituents. In fact, most, if not all, of the research houses have price targets that are higher than yesterday’s closing price. So given the bullishness on Airasia – which comes mainly from an increase in its number of passengers carried and its growth capacity which translates to higher revenue - and its current favorable price, should we buy now?