To be able to profit consistently from the market, one must not only be aware of the recent happenings but also understand the consequences of the recent price development towards the possible changes in the big picture and be flexible enough to alter his view accordingly. Let’s look at Malton, a property share which by looking at it’s recent price development, has a good chance of going above RM1 within a few weeks. To grasp a clearer picture, we have to begin our analysis from the 25th of June.
On the 25th of June, the formation of a long-legged doji with high volume meant that a reversal might happen. At that point, Malton was still in a downtrend so any reversal should be taken as a technical rebound of which a lower high was expected. In the next few days, share price did close higher as the index recovered but at a slower rate. The reluctance of the share price to move as aggressive as the index provided us with the first sign of bearishness. With the break of the immediate low (red arrow), we would expect Malton’s downtrend to continue and thus a lower low was expected. But instead of dipping below 79cents, share price found support there. The inverted hammer (bullish reversal pattern) formed on the 4th of July should make a trader reassess the situation and to take the price development between 26th of June to 3rd of July as a possible “test of supply” (VSA methodology) since the volume is trending lower (area a). This essentially means that 79cents will be the intermediate bottom and share price will move higher from that point. Such an analysis will be confirmed if a higher high is formed, indicating a trend change. On the subsequent day, share price broke through the short-term swing high and closed much higher at the back of high volume, confirming that our analysis is correct and that the trend had “officially” changed from downtrend to uptrend at that point.
Share price gapped up in the morning on the 8th of July but was later dragged down by the poor performance of the market. The fall continued for another 2 days, creating worries among the ordinary investors. But savvy traders should be quick to notice that the price retracement did not substantiate a threat since it was not supported by volume (area b). It was merely a correction needed for price to move to higher levels (a bull pennant). Support was found at 83.5cents, before the share price rose above yesterday’s high today, signaling more upside. In conclusion, Malton is in the beginning of an intermediate-term uptrend and price would retest the 96cents resistance level again before breaching RM1. As long as price does not move below the intermediate bottom (79cents), the intermediate uptrend is still valid. Similiar conclusion could be reached if one were to use market profile analysis, since the formation of the D-shape with volume congested at the 86-88cents indicates that price are about to make a great move.