Chart 1: KLCI as at 11/5/2011.
As indicated by A, the FBM KLCI breaks above the L1 line, breaking away from its bearish biased technical outlook. However, this does not mean an immediate reversal for the KLCI, it only means that the KLCI is not forming a downtrend yet. Nevertheless, breaking above the L1 line is a positive signal for the KLCI for now.
Despite the improving technical outlook of the KLCI, total market volume remains low, as circled at B. Total market volume stays below the 40-day Volume Moving Average, and this suggests that the market participation is still low, and the inflow of fresh capital is still 'insufficient'. This suggests that the investors are still not feeling confident about the local market.
Revision of previous Case Study: Dialog – 7277: Breaking New High.
Chart 2: Dialog – 7277 as at 11/05/2011.
As shown on chart 2, price of Dialog has tested the RM 2.65 on the 5th and 28th of April, but failed to break above the RM 2.56 resistance. Fortunately, it only retreated mildly after being resisted by the RM 2.56, and was supported by the 14, 21, 31 EMA dynamic support, this means that the uptrend was still intact.
As indicated by A, after being supported by the 14, 21 ,31 EMA, price of Dialog formed another higher-low, and later on the 11th of May, breaking above the RM2.56 resistance, making a multi-year new high, and at the same time, extending its uptrend. Therefore, for those whom are already in position, it is a good idea to continue to hold, as long as one should follow his trailing stop strategy by gradually lifting the profit taking or cut loss level higher, according to the 14, 21, 31. This way, it will not only reduce trading risk, it will also maximize the potential of this uptrend.
As for those whom are interested in taking up new position, an ideal entry point would be at a higher-low formation. But new buyers should not use the 14, 21, 31 EMA as a trailing stop immediately, instead, he or she should set a base line, using the recent rebound support (RM2.40). If price should continue its uptrend, then only it is practical to switch to the 14, 21, 31 EMA as trailing stop method.
| 4 Q Rolling PER | 38.96 times | Dividend Yield | 1.15% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 30/06/2010 | 3.1 sen | 2.82% | 10.19% |
| 30/06/2009 | 3.6 sen | 3.30% | 8.35% |
| 30/06/2008 | 3.1 sen | 2.31% | 9.49% |
| 30/06/2007 | 2.2 sen | 1.17% | 10.26% |
| 30/06/2006 | 3.6 sen | 6.67% | 12.83% |
Table 1: Dialog – 7277, yearly dividend, dividend yield, and net profit ratio.
IOIcorp – 1961: Downtrend intact.
Chart 3: IOIcorp – 1961 as at 11/05/2011.
As shown on chart 3, price of IOIcorp has formed a lower-high in April, as illustrated by the dotted line. Since this is a weekly chart that we are talking about, and this signal is usually more significant than a daily chart. In short, IOIcorp is trading in a downtrend.
As indicated by A, after falling for a few weeks, price of IOIcorp showed a little sign of a rebound, but still, a technical rebound from an existing downtrend is not the same as the higher-low rebound of an uptrend. Therefore, one should not be trying to catch a bottom of this rebound.
If price should rebound but still resisted by the 14, 21, 31 EMA, or the dotted line, it means that the downtrend is still intact. Meanwhile, please refer to Chart 3A for the CPO chart.
| 4 Q Rolling PER | 16.03 times | Dividend Yield | 3.20% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 30/06/2010 | 17 sen | 3.28% | 16.23% |
| 30/06/2009 | 8 sen | 1.69% | 6.74% |
| 30/06/2008 | 17 sen | 2.28% | 15.22% |
| 30/06/2007 | 7 sen | 1.35% | 16.55% |
| 30/06/2006 | 43.5 sen | 3.04% | 13.81% |
Table 2: IOIcorp – 1961, yearly dividend, dividend yield, and net profit ratio.
Chart 3A: CPO Benchmark Index as at 11/05/2011.
As shown on chart 3A, price of CPO had once broken below RM 3235 but it managed to rebound the next day, and returned to above RM3235 level. But still, after the rebound, the CPO trend is still showing weakness as there are lower-highs formation. If price of CPO should remain resisted by the 14, 21, 31 EMA dynamic resistance, the technical outlook shall remains weak. If price should fall below RM3235 support, it would be breaking an important new low, thus bringing negative impact to plantation stocks.
Pchem – 5183: Showing weakness.
Chart 4: Pchem – 5183 as at 11/05/2011.
As shown on chart 4, after reaching for its peak at RM7.61 on the 7th of April, price of Pchem started retreat as profit taking took place, which lead to a consolidation at 14, 21, 31 EMA level. After moving sideways for about two weeks, price of Pchem fell below the 14, 21, 31 EMA, thus the uptrend was violated, and those who follow their trading plan, should take profit.
After breaking below the 14, 21, 31 EMA, price of Pchem also formed an L1 descending line, which illustrates the formation of lower-high, which is an early sign of weakness, or possibly a downtrend formation.
Technically, there is no ideal buy signal for Pchem for now, and on the contrary, traders should view the formation of lower-high as a signal to sell. Support for Pchem is at RM 6.80 followed by RM 6.40.
Conclusion:
In conclusion, other than following the broad market trend, one must know the conditions of picking stocks, which includes understanding the fundamental of the company, together with technical analysis to choose stocks that is in an uptrend, and avoid stock trending down, because the stock price will directly affect the performance of one's portfolio.
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