Tag Archives: Downtrend play

KLCI: The Big Crash

CRASH!!! 32.94 points down for our local bourse as foreign funds continue to liquidate their investment in Malaysia, creating panic among the local investment comunities. This massive selldown did not come without any signal. If you are sensitive enough, you would have notice that from the beginning of August, despite gainers outnumbered losers for 9 consecutive days (This is considered extremely bullish as a winning streak of more than 6 days is very rare in Malaysia), the market merely rallied by about 30 points, which was about 3.33 points a day on average. The lack of strength in buying tells us that the sentiment was actually pretty weak. There was no follow through buying. On the 7th of August, divergence in the true sentiment of the market (under Sentiment Analysis) indicated that the uptrend is about to end. Also, since last Tuesday, penny stocks have been dominating the top volume list. As was mentioned in the facebook fanpage, when it’s not the year of pennies and yet they dominate the top volume list, it’s an indication that the market is overheated. Any uptrend is bound to end soon.

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Stock-to-Watch: UEMS [5148]

A bad ending it was for the month of July as the market extended its losses by another 22.46 points, after Fitch’s revision of Malaysia’s outlook prompted foreign investors to liquidate their holdings in Malaysia. To-date, the market had suffered a blow of around 40 points since 24th of July, the day our market closed at a high of 1810. This is the perfect opportunities for us to grab some of the fundamentally good stocks at favorable price, so don’t fret.

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Stock to Watch: GAB [3255]

The composite index edged higher today with oil and gas counters getting most of the attraction (Perdana, Penergy, Alam, and Dayang). Looking at the current market sentiment, the index is expected to stay strong and will re-test the 1793 resistance level again in days to come.

The focus of today’s discussion would be on GAB [3255], a brewing company which had dipped by more than 20% from it’s highest high in just a month. Investors who kept on adding their position as the share price eased are now worrying that their decision to buy could be a huge mistake. If you fall into this category of people, let me assure you that the share is about to rebound very soon. So don’t fret. As for the others who are looking to take a position… let us look at the chart first.

gab

KLCI: Wave 3 In The Making

Fear begets fear. That’s the core of Soro’s Theory of Reflexivity, of which he smartly used to take advantage of the general public’s herd mentality to amass great personal fortune over the decades of his active participation in various financial markets. And yes, reflexivity is happening now in most Asian equity market – at a great magnitude in fact. The past few weeks were disastrous to many as they witnessed their investment gains for the year got wiped off in a relative short period of time. Technical rebounds in global equity markets were short-lived as the weak sentiment induced traders to short on any market pullback. Wrongful application of our innate ability to extrapolate past events to the future causes the investment communities to increasingly believe that we are now experiencing a recessionary dip, and whatever that we had experienced are merely the beginning. This belief is further reinforced by China’s weak PMI data and Bernanke’s “hint” on stopping the quantitative easing, indicating a possible recession or sluggish growth in months or years to come. Recession talks are mushrooming in the local investment communities as well since crucial support levels were breached, no thanks to the appreciation of USD against RM which causes a flight of capital out of our capital market.

KLCI: The Long-waited Fall

At last, after weeks of consolidation, the strong support of 1766 gives way today. The break of the rectangle signals the beginning of a downtrend. At the moment, with the composite index dipping by a staggering 32.25 points today and a total loss of 50+ points in just 3 days, the most sensible strategy is to wait for the right time to take long position. A technical rebound is ought to follow after such a huge move in such short period of time, possibly at the start of the gap (1718) or at the psychological support level of 1700. One can capitalize on the rebound of the market by betting on shares that had dropped a lot recently and are now close to its major support level. It would be best that the shares had fell by at least 10% from the recent top and had fallen consecutively for at least 3 days. High transacted volume tomorrow will be another plus point. Remember, we are trying to profit from the rebound and not to buy-and-hold.

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Some may ask, isn’t it possible that the index will rise tomorrow instead since it had fallen so much today? Yes it is possible, since 1743 could be a support level. If the market really pullback tomorrow, then the strategy should change from preparing to take long to take short. Watch for opportunities to short the market again if the pullback is weak. The support-turned ressitance of 1766 would be a good spot to initiate short future contracts.

Stock to Watch: Pantech [5125]

Looking at the chart of our local index, we can see that the index is now consolidating within a 28 points range (Resistance of 1793; Support of 1765). A spinning top was formed on Thursday with slightly greater volume than the previous days, signalling a possible reversal. In fact, with both the Hang Seng (Hong Kong index) and Nikkei (Japan index) forming long lower-tail spinning top with high volume, the possible reversal of these two leading market in Asia could potentially pull our index up on Monday, thereby creating a better sentiment for shares to reverse/ move higher.

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Having said that, there are still plenty of oppportunities for us to tap on and among them is the popular oil and gas small-cap, Pantech, which would be the focus of today’s discussion. While the expected better sentiment on Monday could turn the share price around, thereby taking away the opportunity to profit, it would be best if we could get ourselves ready in the event that the expected better sentiment does not materialize (Possible since at the time of this writing, US index is falling).

KLCI: The Inevitable Correction


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At last, after more than a week of bullishness, the market formed a bearish engulfing pattern yesterday (as indicated by the red arrow) and today our local index lost 16.31 points, with the number of losers outnumbered the gainers greatly. KLCI was dragged mainly by three of the heavyweights – Maybank [1155], Genting [3182] and IOICorp [1961]. Moving on, we need to watch a few support levels closely (1752 and 1743) as there is a high chance that the index will rebound at these levels. A break of the 1743 support will send our composite index down to the resistance-turned support of 1718, which is an ultra-strong support level. Let’s take a brief look at the two “culprits” that caused the fall of our index today and see whether there’s any profit opportunity. We start with our Gaming giant, Genting [3182].

Stock to Watch: Uemland [5148]

Our index rose and tested the all-time high today but the overall sentiment remained bearish with losers outnumbered the gainers by more than 150 shares. Such a divergence in the index movement and true sentiment that happened in an uptrend tells us to stay away from the market if possible as the bears are still conquering the market. Having said that, there are still opportunities to profit, especially from the extreme movements of some shares. While most KLCI constituents are in green today, Uemland [5148] fail to stay strong as it slid by 13cents, putting the counter in the top 10 losers list.

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Stock to Watch: Aeoncr [5139]

Despite the local index edging up slightly, the overall sentiment of our market continues to be weak today, with the ratio of losers to gainers stands at a high of 2.18. The uncertainty of the result of the coming election is inducing most of the market participants to “sell on strength”, causing most shares that have rose dramatically in the past few months – property stocks especially (e.g. Tebrau, KSL, UEMLand) – to begin reversing, thereby forming the “wave a” of Elliot Wave (The first leg of the downtrend that follows the 3-waves uptrend). Property play is not over yet but at the moment, with the current weak market sentiment, it is definitely not safe to enter into a position. We will take a brief look on Aeoncr [5139] instead, which is also beginning to reverse from its 3-months uptrend.

aeoncr

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.