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.

GENM
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).

GENM1
Since historically price has been trading within the ranges, we should expect it to stay within the ranges as well in the near term. Instead of focusing our analysis on the recent few months and conclude that the stock is bearish, we should look at the big picture and take the recent downward movement as merely a move from the upper trading range to the lower trading range. This essentially means that in the near term, price is expected to fluctuate between RM3.30 to RM3.52. With this knowledge in hand, we could profit from this share by trading any short-term swings. The easiest and safest way to trade would be to buy at the lower limit (RM3.30) and sell at the upper limit (RM3.52) of the short-term trading range. The percentage gain is small but the annualized gain is definitely significant because based on past volatility, each swings within the range could happen in between 2-10 days. With the unusually high traded volume on last Friday, we might just see the share price reverse tomorrow morning as RM3.36 is one minor support level within the trading range. Having made all the analysis, we need to look at the RM3.30 level closely as a break below it will send the price lower to RM3.20, the lower limit of the larger trading range. How about Genting?

genting

The price development of this share had successfully created a rounding bottom. Within the rounding bottom, several cup-and-handle patterns are formed as the share price retraced before moving higher. Recently, after breaking above the RM9.40-RM9.80 trading range, Genting’s share price had retraced back to its previous trading range and is now trading near the lower limit of the short-term range. This could be an opportunity as the recent down-wave can be seen as the handle of a longer-term cup. RM9.40/ RM9.39 are good prices to buy because not only that the major horizontal support crosses the uptrend line at these levels, they are also the Fibonacci confluence zones. The long-upper-tail doji that is formed on last Friday is rather worrying, however. Such a candlestick pattern indicates bearishness and thus a possibility that the share price will plunge further before staging a rebound. If the stock price does move lower in the coming days, the possibility of it rebounding at the next support level would be much higher. The next support level that we will be eyeing is RM9.13, one of the strong S/R level, which coincidentally is also 61.8% retracement level of the uptrend.

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