Stock to Watch: KSL [5038]

KSL

Why is it that KSL is attractive on the 13th of March when it is trading at such a high price compared to the past few months? In making our analysis on this property company, we shall employ day-to-day bar analysis as well as candlestick pattern. We start from 7th of March, when price shot up and closed above RM1.75 with high volume, indicating bullishness. The day after, a doji with long tail is formed, reflecting a possible reversal. For a reversal to be confirmed, the share price must close below the immediate support of RM1.75 in the next few days. On the 11th of March, the share price opened higher and closed lower at the immediate resistance, making the reversal very likely. At this point we should be expecting another black candlestick on the next day that will bring the share lower and thus confirm the downtrend. But instead of moving down, it moved up and managed to close near the high on the 12th of March. This price development that went against the expectation signaled a possible continuation of trend. The bullishness is further supported by its ability to not just stay above the immediate support of RM1.75 but also closed near its high on the 13th of March, when the broad market shed more than 10 points. Let’s check its relative volume density (RVD) as well.

KSL RVD

The chart shows that interests on this share are built at above RM1.77, further strengthening our bullish view on this share. In fact, shares are changing hand between two funds over the past few days. To understand how RVD works, you may want to refer to my previous article, CAP: A prediction using RVD Analysis. From a technical perspective, the share price is also forming a bull flag at the moment (although the volume is not satisfying, because for a bull flag to work, it is best that the volume is low during the formation of the flag).

There are, however, a few risks here worth mentioning despite the bullishness. Firstly, the low liquidity of this share causes the spread cost to be very high. In the event of a sell-down, the losses could widen very quickly as we may not be able to cut-loss at the price we want due to the lack of buyers. Secondly, the acquiring fund may choose to average down its price (though unlikely) since he is having a hard time pushing the price up. The other party is constantly supplying shares to him whenever he tries to move the price higher. So the best trading plan at the moment would be to buy the breakout (above RM1.81), or buying it now in anticipation of a breakout (don’t encourage) while keeping your stop loss tight. Immediate resistance is still at RM1.75.

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