The Hot and Sizzling Property Sector

Property shares have been in the limelight for almost a quarter and most have sky-rocketed to a very dangerous level. At this stage, the risk-to-reward ratio is definitely at the high side and we should not chase after these stocks. Having said that, there are still plenty of opportunities to profit from the swings. We shall look at the current situation of a few property stocks from the technical point of view and see how we can attempt to profit from them in the near future at low risk. Let’s start our analysis with Tebrau [1589].

After moving within an upward channel for close to 2 months, Tebrau’s share price managed to break above the the ascending broadening wedge with high volume on the 15th of March, sending the share sky-high in subsequent days. Despite supported by volume, its share price has moved too much in too short a period (an average of 7% a day for the past 5 days), making a correction very likely in the near term. The correction that follows should be one of high magnitude since a parabolic movement can be clearly seen in Tebrau’s share price. Reflexivity is obviously at work and any slight uncertainty will trigger the first batch of selling, which will create fears in others to take profit or to cut loss, thereby reinforcing the downward movement. The uptrend could continue for a day or two, but at this juncture the risk is much higher than its reward and thus interested party that are looking to take a long position should refrain themselves from joining the herd in the next 2 days. Remember, losing the opportunity is always better than losing the money. Do not bet on overbought shares, thinking that they would the next big thing. The best strategy now would be to enter only after the share price has retrace to a much lower level, possibly at the 50% retracement level of the most recent up wave, or at RM1.05, a major support level. Next, we take a look at KSL [5038].

After running up by 10% in just 3 days with high volume, the momentum fizzles out and has been moving sideway since. The extremely high volume on the 18th of March suggests that the uptrend is real and it creates a good base for the share price to climb further. However, this does not mean that the share price will not retrace in the near term. In fact, this share is vulnerable to a correction given that the share price had rose steadily for the past 2 months without any meaningful downward wave in between. For any uptrend to be long-lasting and sustainable, it has to move in waves, and thus we should see some meaningful correction soon. At the moment, we can see that KSL’s share price is forming a pennant slowly. As the pennant formation usually takes 3-4 days to materialize fully, the price development of this share in the next 2 days will be the key. As long as the price stays above RM2 (the low of 19th of March), the pennant formation will still be valid and KSL will have a high chance of continuing its uptrend once the upper line of the pennant and the high of RM2.07 is broken. If, however, price break down RM2 in the next 2 days, the correction will be on its way and the share price will move lower before continuing its uptrend. Aggressive traders could catch the knife at RM1.91/RM1.90 while conservative traders or longer-term investors could choose to buy only at the major support level of RM1.81, which coincidentally is also the Fibonacci 61.8% retracement level. Lastly, let’s discuss Uemland [5148] briefly.

Despite being an index-linked counter, Uemland’s share price did not fail to move aggressively on the bullishness of the property sector. After forming a 2-weeks long flag, the share price shot up today with high volume and closed at its major resistance of RM2.64. The breakout of the flag indicates that the share price could move higher in the next 2 days, and thus aggressive traders could buy the breakout if it opens higher tomorrow morning. Such a strategy is not suitable for the conservative ones since the upside could be capped after its share price had moved by 30+% in around 2 months (which is a lot for an index constituent). Moving on, the share price is expected to test its nearest major resistance at RM2.80 before it is able to climb higher to test its psychological resistance of RM3.

Regardless of which property shares you prefer to trade, do keep your stop loss tight and trade cautiously.

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