Chart 1: KLCI as at 44/5/2011.
As at the 4th of May, the KLCI has been consolidating in a sideways manner for the past week, and as a result, the 14, 21, 31 EMA are losing their gradient. In other words, when the moving average lines are staying flat, the significance of their signals is reduced. Meanwhile, as illustrated by the dotted line, the KLCI might be forming a lower-high, which is an early sign of weakness.
As indicated by A, total market volume remains below the 40-day Volume Moving Average, and this suggests that the market is indeed quiet, as inflow of fresh capital is also low. Also, it implies that the investors' confidence is also low. It is like boiling water, where you have to keep the heat intact, or else, once the heat is removed, the water cools down. Don't forget that this is a the entire market volume that we are talking about here, and if total market volume is low, the chances of individual counters to sustain their uptrend is also affected.
This week's Case Studies:
IOIcorp – 1961: Technical outlook remains weak.
Chart 2: IOIcorp – 1961 as at 04/05/2011 (Weekly Chart)
As indicated by A on weekly chart of IOIcorp, price of IOIcorp fell below the RM 5.50 support, and the breaking below this level, means that all investors who had bought IOIcorp and are still holding, are losing money now. Therefore, these losers are having negative memory of IOIcorp.
Meanwhile, the T1 line is illustrating the formation of Lower-high, which means that IOIcorp is now in downtrend.
Technically, provided that price of IOIcorp is staying below the T1 line or the 14, 21, 31 EMA dynamic resistance, the technical outlook shall remains on the negative side, and it is generally not advisable to trade against the weakness of price movement. Of course, it is normal to have a rebound after falling for some time, but if price should rebound and form a lower-high again, it suggests that the downtrend is expected to continue. Meanwhile, readers can refer to Chart 2A, the CPO chart.
Chart 2A: CPO Benchmark Index as at 04/05/2011.
As indicated by A, price of CPO has been trending weak, but fortunately still supported by the RM3235 support. Although price of CPO has been supported by this level, the rebounds showed its weakness by forming lower-highs. Technically, if CPO should fall below RM3235 level, it would be making a 6 months new low, and most likely, plantation stocks will be affected.
| 4 Q Rolling PER | 16.12 times | Dividend Yield | 3.18% |
| 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 1: IOIcorp – 1961, yearly dividend, dividend yield, and net profit ratio.
CIMB – 1023: Trendless.
Chart 3: CIMB – 1023 as at 04/05/2011.
As indicated by A, price of CIMB has been trading in a narrow range, and for the last month, the fluctuation of price was less than 3.5%. As price is entering the narrow sideways movement, the 14, 21, 31 EMA has lost its gradient, which makes the EMA non-functioning, or the significance of the 14, 21, 31 EMA is greatly reduced. Although it might not be a good time to study the 14, 21, 31 EMA for CIMB now, it is a good time to apply the Bollinger Bands.
When price is staying in a narrow sideways manner, the Bollinger Bands will contract significantly, suggesting that price is consolidating, and trendless, until the obvious re-expansion of the band width. When the Bollinger Bands should re-expands, it means that price begins to fluctuate. If the Bollinger Bands expands with price above the Bollinger Middle Band, it means a positive biased volatility, and other wise, a negative biased volatility.
Generally, after the Bollinger Bands re-expanded, and when price should form a higher-Low or lower-high, then it is time to apply the 14, 21, 31 EMA again for trailing stop, or other trend trading reference purpose.
Based on the current chart of CIMB, the RM7.80 is an important support level for the year 2011. If price of CIMB should break below this level, it means those investors whom had bought CIMB in 2011 and are still holding, will turn their profit into losses, thus creating more selling pressure.
| 4 Q Rolling PER | 16.71 times | Dividend Yield | 3.18% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2010 | 26.07 sen | 3.23% | 29.81% |
| 31/12/2009 | 18.50 sen | 1.46% | 26.31% |
| 31/12/2008 | 25 sen | 4.27% | 25.22% |
| 31/12/2007 | 25 sen | 2.27% | 31.00% |
| 31/12/2006 | 15 sen | 1.94% | 23.53% |
Table 2: CIMB – 1023, yearly dividend, dividend yield, and net profit ratio.
Revision of last week's Case Study: Timecom – 5031: Testing support level.
Chart 4:Timecom – 5031 as at 04/05/2011.
As shown on Chart 4, after breaking above the resistance on the 22nd of April, price of Timecom started to retreat as a pull-back effect, and price of Timecom retreated to RM0.89~RM0.90 support level. Technically, if price should failed to stay above this level, the breakout would be a faulty one.
As indicated by A, fortunately, price of Timecom managed to stay above the 14, 21, 31 EMA dynamic support, and therefore, the technical outlook remains positive. If price could rebound from the 14, 21, 31 EMA, the uptrend is likely to remain intact.
On the contrary, if price should continue to pull back, and later break below the 14, 21, 31 EMA, the uptrend would be violated, then investors will have to honor their own trading plan, by cutting loss, or taking profit. For example, for those whom had previously set a base line, if price of Timecom should fall below this base line, they have to cut loss. As for those whom had bought much earlier, they would have a choice to apply the 14, 21, 31 EMA as a trailing stop reference.
| 4 Q Rolling PER | 21.16 times | Dividend Yield | 0.00% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2010 | 0 sen | 0.00% | 33.35% |
| 31/12/2009 | 0 sen | 0.00% | 11.54% |
| 31/12/2008 | 0 sen | 0.00% | -331.43% |
| 31/12/2007 | 0 sen | 0.00% | -53.37% |
| 31/12/2006 | 0 sen | 0.00% | -53.01% |
Table 3: Timecom – 5031, yearly dividend, dividend yield, and net profit ratio.
Conclusion:
When the broad market direction is unclear, it is harder to follow, and stock pick will be more difficult. Therefore, if one should find it difficult to making any buying picks, the natural thing to do is to avoid buying at all.
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