Tag Archives: klci constituent

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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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 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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Genting [3182], GENM [4715]: Trading the Swings

Genting and Genting Malaysia (GENM) are two KLCI constituents that are famous for their volatility. The recent fall in their share prices had created more opportunities for us to profit from the swings. Let’s start our analysis by looking at the price development of GENM’s share.

It is obvious from the day chart that the share price is heading south. The creation of lower highs over the past few weeks, coupled with the fact that it breached the uptrend line connecting the 4 obvious lows just few days ago, supports the argument that this share is in a downtrend and thus market participants should avoid trading this share. Such an interpretation is technically correct but fail to take into account the big picture. If we look at the price movement of this share over the past two years (see chart below), we will realize that the share price is trading within a wide range (RM3.20 – RM3.93. We do not use RM4.12 as the upper limit of the trading range because the price did not stay above RM3.93 for long. It is better to consider it as a false breakout) and the trading range is narrowing slowly over the years and has been concentrating at around RM3.30 to RM3.77 for close to a year. In the middle of this trading range we have the RM3.52 level which has been tested as supports or resistances (S/R) for close to 10 times. This strong S/R level can be seen as separating the trading range of this company’s share price into 2 smaller trading ranges (RM3.30 – RM3.52, and RM3.52 – RM3.77).

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].

KLCI: A Change in Free-float Methodology

Our KLCI sank deeper today after news of EU leaders taxing bank deposits in order to part-fund the bailout of Cyprus created renewed worries among investors worldwide. This came after a huge sell-down on the last 10 minutes of the trading session on Friday, believing to be due to portfolio rebalancing by funds that track the performance of our index as the methodology used in calculating the weightings of the index constituents will be changed effectively on the 18th of March. The shocking moves by EU leaders, coupled with the election fear that has been lingering since late January, is expected to send our CI lower to test the 1600 psychological support again. While our index is moving into the oversold territory and today’s candlestick is forming a long tail, indicating a possible reversal, we should be mindful that the sentiment is weak currently and any release of unfavourable news might bring our index to a lower low. Do trade cautiously.

PPB [4065]: The Forgotten Giant

The share price of this KLCI constituent was hammered since last year due to the expected short-term poor performance of its 18.3%-owned associate, Wilmar, which contributes more than 50% of PPB’s earnings. After moving slightly lower than its book value in the end of December 2012, interests in this share started to kick-in and price began to move upward with high volume.