Bursa Malaysia Technical Analysis & Stock Trading

KLCI, Rhbcap, Tenaga

2011-05-19T10:40:00.004+08:00

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.

Rhbcap – 1066: Breaking new high.

Chart 2: Rhbcap – 1066 as at 11/05/2011.

As shown on chart 1, after breaking above the RM 8.70 resistance, price of Rbhcap pullback, but fortunately, it managed to stay above the 14, 21, 31 EMA, as well as the RM8.70 level.

As indicated by A, after finding its supported at the 14, 21, 31 EMA, price of Rhbcap rebounded and formed a higher-low, which means that the uptrend is likely to continue. Therefore, for those whom are already in position, it is a good idea to continue to hold as long as lifting the profit taking or cut loss level higher according to the 14, 21, 31 EMA.

4 Q Rolling PER	13.44 times	Dividend Yield	2.97%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	26.38 sen	3.23%	23.10%
31/12/2009	22.45 sen	4.25%	22.14%
31/12/2008	19.60 sen	5.03%	17.48%
31/12/2007	13.60 sen	3.66%	21.44%
31/12/2006	8 sen	2.34%	7.96%

Table 1: Rhbcap – 1066, yearly dividend, dividend yield, and net profit ratio.

Tenaga – 5347: Testing important support.

Chart 3: Tenaga – 5347 as at 11/05/2011.

As shown on chart 3, price of Tenaga has been supported by the RM 6.00 level for more than 3 months, and until now, despite being supported, it has not been able to regain its strength, but instead, forming lower-highs.

The formation of lower-high outlined the weakness of this stock, but fortunately, Tenaga has not broken below RM6.00 support, thus not yet extending its downtrend. However, investors should not view the RM6.00 support as the “lowest” point. In fact, since started falling in September, 2010, price of Tenaga has been staying in a downtrend, but only recently, finding its support at RM6.00, and temporary putting a pause on the downtrend.

Have you ever wonder, what these investors were thinking when they buy at around RM 6.00. We can safely guess that they must believe that it is the lowest price for now, and hoping that price would start to rebound from here, furthermore this is a heavy weighted KLCI component stock, and the risk of losing the entire line is almost impossible.

It is understandable if one would buy this stock with the above mindset. However, we have to think deeper than that. Are this people who are trying to buy at the bottom making money now? Answer is no. Most of them would say “Never mind, I will hold longer and wait for it to reverse.” But we can not ignore a natural psychology, which is when price is moving sideways, while these investors are already in position, waiting anxiously, the confident as well as the hope will gradually reduce, and some even started to feel regret. “If I knew that it was not going to rebound, I would have waited.” Especially when they see that other stocks are moving, but not this one.

What about those who had bought earlier? Don't you think that they were also believing that it was the “bottom” of the stock at the time they bought it? They were also hoping that they were right, but now, I am guessing that these early buyers are mostly feeling sorry for themselves, together with guilt and regret.

If later, price of Tenaga should break below RM 6.00, how would all these “bottom fishers” feel? By then, there will be more selling pressure, as the RM6.00 level becomes their negative memory, the memory of “betrayal” instead of the original “promise”.

Therefore, I cannot emphasis stronger, that regardless of the price position, buying should be based on the direction of price trend, not the price.

4 Q Rolling PER	9.30 times	Dividend Yield	4.30%
Dividend		Dividend Yield	Net Profit Ratio
31/08/2010	26 sen	2.94%	10.56%
31/08/2009	17.77 sen	2.22%	3.19%
31/08/2008	20 sen	2.53%	10.07%
31/08/2007	36.30 sen	3.65%	17.41%
31/08/2006	12 sen	1.31%	10.43%

Table 2: Tenaga – 5347, yearly dividend, dividend yield, and net profit ratio.

Conclusion:

Discussion of stock and identifying the characteristic is usually easier than in practice. But the hardest part is the psychological factors of investors. Because, we were born to be afraid of stock at higher price, and therefore, making it harder for us to buy a stock existing in an uptrend.

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KLCI, Dialog, IOIcorp, Pchem

2011-05-19T10:35:00.006+08:00

Chart 1: KLCI as at 11/5/2011.

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.

KLCI, IOICorp, CIMB, Timecom

2011-05-19T10:30:00.006+08:00

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.

KLCI, UEMLand, Perisai, EO

2011-05-19T10:24:00.002+08:00

Chart 1: KLCI as at 44/5/2011.

This week's Case Studies:

Uemland – 5148: Remains in consolidation.

Chart 2: Uemland – 5148 as at 04/05/2011.

As shown on chart 2, price of UEMland has been consolidating in a Rectangular pattern, with RM3.00 being the resistance, and the RM2.65 being the support. Technically, when price is staying in a rectangular pattern or a trading range, the direction is usually unclear, thus not suitable for trading.

Although price of UEMland been supported by the RM2.65, the recent rebounds, has shown some weakness as price failed to touch RM3.00, but instead, forming lower-highs, as illustrated by the dotted line. The lower-high is showing an early weakening signal for UEMLand.

If price should later break below RM2.65, it would be making a 4 months new low. It means that all investors whom have been holding in this 4 months, will be turning their profit (if any) into losses, thus creating more negative memory, and eventually increasing the selling pressure. Therefore, at this time where the weakness is still in place, it is not a good time to buy.

If price should reverse, then it should first form a Higher-low, then breaking above RM3.00 with strong volume. If price should break below RM2.65, the next support are found at RM2.38 followed by the RM2.00 psychological level.

4 Q Rolling PER	44.83 times	Dividend Yield	0.00%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	0 sen	0.00%	41.42%
31/12/2009	0 sen	0.00%	28.44%
31/12/2008	0 sen	0.00%	14.50%

Table 1: Uemland – 5148, yearly dividend, dividend yield, and net profit ratio.

Perisai – 0047: Uptrend was violated.

Chart 3: Perisai – 0047 as at 04/05/2011.

As indicated by A on Chart 3, price of Perisai formed a Lower-high, as illustrated by the dotted line, which suggests a weakness of price movement. Price of Perisai also broke below the 14, 21, 31 EMA as well as the RM0.79 support, thus the uptrend was violated.

Although no one knows where the weakening price movement shall continue, one must honor his or her own trading plan which was set before or at the time buying this stock. Since the uptrend is violated, it is logic to cut loss or to take profit.

Technically, provided that price of Perisai is still staying below the falling 14, 21, 31 EMA, the technical outlook for Perisai is on the negative side, and there is no buying signal, until a valid break out above the 14, 21, 31 EMA with a formation of Higher-Low.

4 Q Rolling PER	50.32 times	Dividend Yield	0.00%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	0 sen	0.00%	13.63%
31/12/2009	0 sen	0.00%	32.60%
31/12/2008	0 sen	0.00%	20.98%
31/12/2007	0 sen	0.00%	7.55%
31/12/2006	0 sen	0.00%	4.28%

Table 2: Perisai – 0047, yearly dividend, dividend yield, and net profit ratio.

E&O – 3417: Pullback effect.

Chart 4: E&O – 3417 as at 04/05/2011.

As indicated by A, price of E&O has been staying in a short term uptrend since last month and even broke above the RM1.38 resistance on the 28th of April, breaking a 3 months new high. After the breakout, price of E&O has its high reaching RM 1.54 but profit taking started to kick in and price retreated as a pullback effect.

It is quite normal to have a pull-back after breaking above a resistance, and technically, price should stay above its recently broken resistance (RM 1.38) and the break out shall remains intact. Ideally, volume has to be reduced during the pull-back, this means that the selling pressure was not too strong. But as price rebound again, volume has to be significantly higher in order to resume its uptrend. On the other hand, if price should break below RM1.38, the break out would be a faulty one.

Nevertheless, for those whom are already in position, it is a good idea to use the 14, 21, 31 EMA as a trailing stop reference, by lifting the cut-loss or profit taking level gradually higher according to the 14, 21, 31 EMA. This way, it will gradually reduce your trading risk.

4 Q Rolling PER	25.60 times	Dividend Yield	2.53%
Dividend		Dividend Yield	Net Profit Ratio
31/03/2010	3.80 sen	4.29%	20.12%
31/03/2009	0 sen	0.00%	-12.45%
31/03/2008	5 sen	2.78%	24.95%
31/03/2007	4 sen	1.84%	5.76%
31/03/2006	0 sen	0.00%	12.93%

Table 3: E&O – 3417, yearly dividend, dividend yield, and net profit ratio.

Conclusion:

As an investor or trader, one should realize that there are times where the market is bullish, bearish, and also in an unclear trendless situation. It is said that different strategies are being applied for different market situation, for example, some choose to short the market during a bearish trend. But the point is, it requires different skills for different strategies, and one does not have to imitate what others do. We have to first know what we are capable of, our trading style, capital allocation, and emotional control. We will have to always remind ourselves that we don't have to trade all the time. When situation is uncertain, or if one should feel uncomfortable, it is perfectly OK to stay out of the market.

KLCI, Axiata, Benalec, Tenaga

2011-05-19T10:14:00.006+08:00

Chart 1: KLCI as at 20/4/2011.

As indicated by A, the FBM KLCI rebounded near the 1513 support on the 20th of April, and now testing the 14, 21, 31 EMA. If the KLCI could successfully break above the 14, 21, 31 EMA, it would likely to form a higher-low, which is a first characteristic of an uptrend formation. Next resistance for the KLCI is at the recent high of 1566 and the historical high of 1577.

Meanwhile, as indicated by B, total market volume remains low despite increasing slightly. Generally, with volume below the 40-day Volume Moving Average, it suggests that the market participation is low, and the inflow of fresh capital is also low. Therefore, the KLCI is less likely to pickup its strength.

This week's case studies:

Axiata – 6888: Testing important support of the year 2011.

Chart 2: Axiata – 6888 as at 20/04/2011.

As shown on chart 2, price of Axiata has been testing the RM 4.68~RM 4.70 a few times in 2011, and fortunately, until now, it is still supported by RM 4.68~RM .470. Therefore, the RM 4.68~RM 4.70 has become the important support for 2011.

As indicated by A, for the past two months, price of Axiata has been trending weak, and now testing the RM 4.68~RM 4.70 again. If price should break below this support, it means that those whom had been holding since December 2010, will turn their profit into losses. Therefore, it would create a strong negative memory at this level, and it could trigger more selling.

In other words, when price is testing an important support, it may seen like it is forming a bottom, but we should not try to buy low. As for long term investors, a good idea is to refer to the weekly chart of Axiata for a bigger picture. Refer to Chart 2A.

Chart 2A : Axiata – 6888 as at 20/04/2011. Weekly.

As indicated by A, on Chart 2A, since entering its uptrend in the middle of 2009, price of Axiata has been staying above the rising 14, 21, 31 Weekly EMA, a long term dynamic support. If price should break below this long term dynamic support, it suggests that the long term uptrend is violated. Thus a signal to consider to take profit.

4 Q Rolling PER	22.38 times	Dividend Yield	2.13%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	10 sen	2.02%	11.33%
31/12/2009	0 sen	0.00%	12.61%
31/12/2008	0 sen	0.00%	4.39%

Table 1: Axiata – 6888, yearly dividend, dividend yield, and net profit ratio.

Benalec – 5190: Forming higher-low.

Chart 3: Benalec – 5190 as at 20/04/2011.

As shown on chart 3, price of Benalec broke above the 14, 21, 31 EMA on the 23rd of March, and rose all the way to RM 1.61. Price retreated as profit taking took place, but as indicated by A, the 14, 21, 31 EMA is still supporting the price, forming a higher-low. Meanwhile, the 14, 21, 31 EMA is also serving as the dynamic support.

Based on the chart of Benalac, price is likely to remain its short term uptrend, and investors could choose to hold. However, it is not time to use the 14, 21, 31 EMA yet, until price should start rising. As for new investors whom are interested in taking up position, the same strategy is applied here.

Nevertheless, if price should start rising, it will have to test the RM 1.57 ~ RM 1.61, and technically, to form an uptrend, price has to first form a higher-low, then followed by breaking its recent high, (new high).

Tenaga–5347: Weakness remains in consolidation.

Chart 4: Tenaga–5347 as at 20/04/2011.

As shown on chart 4, price of Tenaga has been testing the RM 5.95~RM 6.00 support many times, since February, 2011. With the support remains intact, it has prevented the downtrend of Tenaga from worsen, and price is entering a consolidation. However, lower-highs formation is still visible, as every time price rebounded from the support, the upper turning points are getting lower, which shows the weakness of the consolidation.

Technically, formation of lower-highs suggests weakness of the trend, but the other important factor that determines the downtrend is the break out below the RM 5.95~RM 6.00 support. It is usually not a good time to buy right now. Unless, price should break above the 14, 21, 31 EMA and later forms a higher-low.

Conclusion:

As illustrated by above examples, when stock price is testing the important support, it might seem like it is staying at a “lowest” point, but it is important for one to wait until it really starts forming an uptrend, then only buy. Buying too early while price is still testing the support is impulsive, and once stock price break below the support, selling pressure is expected to be strong.

KLCI, MPHB, Genm, Pchem

2011-05-19T10:10:00.005+08:00

Chart 1: KLCI as at 20/4/2011.

This week's case studies:　

MPHB – 3895: Breaking new high.

Chart 2: MPHB – 3895 as at 20/04/2011.

As indicated by A, price of MPHB successfully rebounded from the rising 14, 21, 31 EMA in April, and extended its uptrend, breaking new high. Therefore, for those already in position, it is a good idea to hold, provided that one should gradually lift the cut-loss level or profit taking level higher according to the 14, 21, 31 EMA, to reduce trading risk. This is the idea of trailing stop.

As for those whom are interested in taking up new position, one has to first set a base line, and consider the risk of the entry price with this base line, before buying. This is because price might not immediately continue its uptrend, and possibly enter a consolidation stage first. Therefore, new buyers may not be able to apply the 14, 21, 31 EMA immediately, unless price of MPHB continues to rise.

If price should consolidate, then these investors would have to honor their base line, set prior their entry. If price should break below this base line, it either means that the uptrend is violated, or the risk is higher than you can handle, and the logical thing to do is to cut loss.

4 Q Rolling PER	10.78 times	Dividend Yield	2.96%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	9 sen	3.45%	8.39%
31/12/2009	9 sen	4.66%	10.15%
31/12/2008	10 sen	9.26%	4.31%
31/12/2007	11 sen	4.74%	11.71%
31/12/2006	0 sen	0.00%	36.54%

Table 1: MPHB – 3895, yearly dividend, dividend yield, and net profit ratio.

Genm – 4715: Pull back after breaking new high.

Chart 3: Genm – 4715 as at 20/04/2011.

As shown on chart 3, price of Genm broke new high on the 31st of March, and later price pulled back, entering a consolidation. Fortunately, when pull back, price of Genm remained above RM 3.65. Meanwhile, as indicated by A, price of Genm also supported by the 14, 21, 31 EMA, and this suggests that the technical outlook for Genm is still positive.

Technically, price of Genm has to stay above the 14, 21, 31 EMA or else, the uptrend will be affected. Therefore, those whom are already in position can choose to hold, while new buyers will have to wait for a higher-low to buy. As for long term investors, it is a good idea to refer to the weekly char of Genm for a bigger picture view.

4 Q Rolling PER	16.49 times	Dividend Yield	2.16%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	8.00 sen	2.42%	23.94%
31/12/2009	7.30 sen	2.68%	26.52%
31/12/2008	7.00 sen	3.10%	12.98%
31/12/2007	6.48 sen	1.67%	35.74%
31/12/2006	27 sen	1.85%	24.84%

Table 2: Genm – 4715, yearly dividend, dividend yield, and net profit ratio.

Pchem – 5183: Uptrend remains intact.

Chart 4: Pchem – 5183 as at 20/04/2011.

As shown on chart 4, despite retreated from its recent high of RM 7.60, price of Pchem remains supported by the 14, 21, 31 EMA, and this suggests that the uptrend remains intact. Therefore, one could choose to hold, provided using a trailing stop method with the 14, 21, 31 EMA as a reference.

As indicated by A, after being supported by the 14, 21, 31 EMA, price of Pchem started to tick up, and it could be forming a higher-low again. Therefore, it could be viewed as a buy signal. For new buyers, it is advisable to take RM 6.80 as a base line, which is the mental maximum loss level. If price should continue rising, then only one could use the 14, 21, 31 EMA as a trailing stop.

Conclusion:

It is very important that one should honor his own base line. Once the stock price break below this level, it means that either the market has changed, or your analysis was wrong. Either way, it is hurting your equity. Those whom are not honest to themselves remove the base line, and continue to hold, would eventually pay a huge price.

KLCI, IOIcorp, Drbhcom, MHB

2011-05-19T10:05:00.005+08:00

Chart 1: KLCI as at 13/4/2011.

As shown on chart, the KLCI had a sharp correction last week, and during the correction, the KLCI had briefly broken below the 14, 21, 31 EMA, but was supported by the 1525 level and rebounded on Wednesday.

Technically, the couple of falling days could not indicate a reversal, but merely a technical correction. Unless, of course, the KLCI should form a lower-high, then it would be an early warning signal. Nevertheless, market volume has fallen below the 40-day Volume Moving Average. Generally, if volume should remain low, the market or the KLCI is less likely to regain its strength.

Case Studies:

IOIcorp – 1961: Short term weakness.

Chart 2: IOIcorp – 1961 as at 13/04/2011, weekly chart.

When the KLCI corrected, index components are likely to be affected, IOIcorp is no exception. As shown on chart 2, price of IOIcorp is now testing the RM 5.50 support. The RM 5.50 was originally a resistance (from October 2009 to September 2010). when price of IOIcorp broke above the RM 5.50 resistance, it became the support for the year 2011. In end of February 2011, price of IOIcorp retreated sharply, and tested this support, and fortunately, it works, price rebounded, and avoided a downtrend formation.

Now that price of IOIcorp is testing the RM 5.50 again, and if price should really break below this level, the technical outlook for IOIcorp would stay negative. On the weekly chart basis, price of IOIcorp has already broken below the 14, 21, 31 Weekly EMA, and therefore, IOIcorp chart is showing weakness.

In short, if price of IOIcorp could stay above RM 5.40~RM 5.50, then it might have a chance to prolong its sideways consolidation, and hopefully when market turns better one day, then it would have a chance to regain its strength. But for now, RM 5.40~RM 5.50 is an important level to watch out for.

4 Q Rolling PER	16.60 times	Dividend Yield	3.09%
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.

Drbhcom – 1619: Uptrend remains intact.

Chart 3: Drbhcom – 1619 as at 13/04/2011.

As shown on chart 3, after breaking above the RM 2.25 resistance, price of Drbhcom pullback last week, and now testing the RM 2.25 support as well as the 14, 21, 31 EMA dynamic support. Fortunately, as indicated by A, price of Drhbcom successfully rebounded from the 14, 21, 31 EMA and RM 2.25, thus the uptrend is still intact.

For those whom are already in position, as long as price of Drhbcom is still supported by the 14, 21, 31 EMA, it is still a good idea to hold. Provided one should gradually lift the cut loss level higher according to the 14, 21, 31 EMA.

Although the uptrend is still intact, to sustain the uptrend, price has to later break above RM 2.50 peak. On the contrary, if price should later form a lower-high, it would be an early signal implying a weakness of Drbhcom's uptrend.

4 Q Rolling PER	21.13 times	Dividend Yield	2.22%
Dividend		Dividend Yield	Net Profit Ratio
31/01/2010	8.50 sen	2.39%	7.25%
31/01/2009	7.00 sen	2.97%	5.23%
31/01/2008	5.00 sen	6.71%	3.32%
31/01/2007	2.00 sen	1.33%	3.46%
31/01/2006	2.00 sen	2.78%	-1.00%

Table 2: Drbhcom – 1619, yearly dividend, dividend yield, and net profit ratio.

Revision of last week's Case Study: MHB – 5186: Uptrend remains intact.

Chart 4: MHB – 5186 as at 13/04/2011.

Like many counters, price of MHB was affected by the sharp correction of the KLCI last week, but price of MHB managed to stay above the 14, 21, 31 EMA, and this suggests that the uptrend of MHB is still intact. Therefore, those whom had already bought, it is a good idea to stay in position, so long price is still above the 14, 21, 31 EMA.

Technically, if price of MHB should break below the 14, 21, 31 EMA, then the short term movement of MHB will be affected, but the longer term movement of MHB shall remain unaffected. If price should later form a lower-high after price of MHB stays below the 14, 21, 31 EMA, it suggests a weakness of price movement, or a possible downtrend formation, thus a signal to suggests a reduce of position.

Since total market volume were reduced, and the market is in a consolidation mood. Therefore, those whom are interested in picking up new position, will need to consider that if market volume should stay low, chances of stock to rally is generally lower.

Conclusion:

Generally, the chances of a stock sustaining its uptrend, has to do with the overall market condition, particularly, the volume. When volume is low, the market usually is in a consolidation mood, or with some weakness. When stock market rally, volume is an important element to push price higher. Of course, volume can not always be high, it is not likely. So long as the rally with volume, will repeat again and again, it would suffice in fueling the general uptrend.

KLCI, Mahsing, Hiaptek, JCY

2011-05-19T10:00:00.003+08:00

Chart 1: KLCI as at 13/4/2011.

Case Studies:

Revision of last week's case study: Mahsing – 8583: Testing new high.

Chart 2: Mahsing – 8583 as at 13/04/2011

As indicated by A, price of Mahsing was resisted by the RM 2.73 resistance and started falling. However, the falling was rather mild, which seems to be a healthy correction. As shown on chart 2, the T1 uptrend line for Mahsing remains intact, and if price of Mahsing should rebound from the T1 line, the uptrend is likely to continue. But to sustain the uptrend, a valid break out above the RM 2.73 resistance is a must.

Technically, if price should rebound from the T1 or the 14, 21, 31 EMA dynamic support, it would be another formation of a higher-low, which is an important characteristic of an uptrend. Therefore, in general, when price should stay above the 14, 21, 31 EMA or the T1 line, it is a good idea to hold. Provided one should gradually lift the cutloss level higher according to the 14, 21, 31 EMA as a trailing stop.

As for those whom are interested in taking up new position, a higher-low signal would be a good entry signal, but of course, the condition of the market at the time of forming a higher-low plays an important factor which affect the strength and reliability of the signal. However, since price of Mahsing has not broken new high, new investors are not advisable to apply the 14, 21, 31 EMA as a trailing stop, but to first set a base line with RM 2.30 as the cut loss point. Only apply trailing stop when price breaks new high and extended the uptrend. If one should feel that the risk losing between his or her entry point to the cut loss point or RM 2.30 is too high, it is better to give up this trade.

4 Q Rolling PER	18.24 times	Dividend Yield	2.93%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	7.60 sen	3.03%	10.64%
31/12/2009	6.50 sen	3.61%	13.44%
31/12/2008	8.00 sen	5.00%	14.30%
31/12/2007	8.00 sen	4.17%	14.15%
31/12/2006	12.00 sen	3.57%	13.19%

Table 1: Mahsing – 8583, yearly dividend, dividend yield, and net profit ratio.

Hiaptek – 5072: Forming higher-low for the first time after so long.

Chart 3: Hiaptek – 5072 as at 13/04/2011.

As indicated by A on Chart 3, price of Hiaptek rebounded from the 14, 21, 31 EMA on the 7th of April, forming a higher-low, and this is an early signal implying that an uptrend could be forming, and later price of Mahsing broke above RM 1.11 resistance. After the break out, price of Mahsing pullback as affected by the general market performance. Fortunately, volume was significantly smaller during the pullback as this implies that the pullback was rather healthy as no panic selling is seen.

If price should later rebound from the 14, 21, 31 EMA, it suggests that the short term uptrend is likely to continue, but if price should break below the 14, 21, 31 EMA, then the uptrend is violated. For those whom had bought early, it is a good idea to practice the trailing stop method, by using the 14, 21, 31 EMA as a trailing stop reference, or take RM 1.00 as a base line. Next resistance of Hiaptek is seen at RM 1.15.

4 Q Rolling PER	10.77 times	Dividend Yield	1.36%
Dividend		Dividend Yield	Net Profit Ratio
31/07/2010	1.50 sen	1.15%	4.76%
31/07/2009	1.50 sen	1.50%	3.68%
31/07/2008	4.11 sen	2.60%	9.35%
31/07/2007	2.50 sen	1.05%	5.53%
31/07/2006	2.50 sen	3.05%	3.19%

Table 2: Hiaptek – 5072, yearly dividend, dividend yield, and net profit ratio.

JCY – 5161: Forming Higher-low.

Chart 4: JCY – 5161 as at 13/04/2011.

As shown on chart 4, price of JCY formed a higher-low, after falling for a year, and the formation of higher-low had been absent for a long time. When price formed a higher-low, it was also supported by the 14, 21, 31 EMA, and also broke above the RM 0.78~RM0.80 resistance. However, the correction of the market pull JCY price back last week, but as indicated by A, price of JCY is still supported by the 14, 21 ,31 EMA, and this means that there is still a chance for the uptrend to form.

If price should rebound from the 14, 21, 31 EMA, the 14, 21, 31 EMA shall continue serving as the dynamic support and break out above the RM0.78 ~ RM 0.80 is possible, then a uptrend would sustain.

Technically, the most ideal break out would be a break out with strong volume, and of course, the condition of the overall market is very important too. If any one should be interested in taking up new position, a good break out above RM0.78~RM0.80 with strong volume should be viewed as a buy signal, but he or she should set a base line at RM0.67~RM0.80. If price should continue its uptrend, then only switch to the 14, 21, 31 EMA as the trailing stop reference.

Please be reminded that price of JCY has been falling or about 1 year, since its peak of RM 1.98, and only now it is showing some sign of a possible uptrend. On one hand, it appears that the price of JCY now is “cheap” and one could understand why most would call it a “bottom fishing” opportunity.

On the contrary, one should also consider the other side of the factor, which is the selling pressure. Consider that during the course of a downtrend, many investors whom initially bought must have thought that their entry price was “reasonable” or “cheap” or else, they would have waited. But as price fall, these now regret investors are losing money, some are losing so much that they only wanted to break even. Therefore, there are many losers in the downtrend are now looking forward to break even, and this notion will turn into “reader sellers” thus explained as selling pressure or resistance.

As always, there are two sides to a story, and how does one select and cope with the contradiction of ideas? This is the time where investors should first consider the risk involved, then only consider the potential reward. First, one must determine how much he or she is prepared to lose, and if the maximum allocated amount is bearable, then the next step is to try to follow the market flow, do not go against the general market direction. Do know that there is no system or method to find out how long or how strong an uptrend would go, and all uptrend are formed with the repetition of short term rallies.

Lastly, when in a situation where one finds him or herself torn between buying or not, or the analysis signals are not obvious, it is best to give up the trade, look for something else more manageable. Because, trading is a private matter, you don't have to feel pressure just someone else bought the same counter.

Conclusion:

Technical analysis, is a study of stock past behavior, and when there are no special events that causes drastic movement, technical analysis believe that there is a logic path to the stock behavior. Despite all that, still, it does not have they ability to forecast, not even the next minute. The use of technical analysis is to help one understand the risk behavior of a counter, then from there, design a trading plan, and follow the general market direction, and hopefully profit from it. For those shallow thinkers, who solely rely on “signals”, technical analysis becomes meaningless. That is why you will hear many people complaining about the fault of technical analysis, it is not the system, it is the person that has problem.

Dialog, Sapcres, MHB

2011-04-18T09:04:00.005+08:00

A few weeks after the nuclear crisis of Japan, stock markets across the world are recovering, especially the US and European markets, which are back to the pre-crisis level. Of course, the KLCI also gaining strength, breaking above the 14, 21, 31 EMA.

Chart 1: KLCI as at 30/3/2011.

As indicated by A, after breaking above the 14, 21, 21 EMA, the KLCI also broke above 1525 WinChart Automatic Fibonacci Retracement, and the technical outlook for the KLCI is now positive. As for whether the KLCI could form an uptrend, it will have to first firm a higher-Low.

Meanwhile, as indicated by B, total market volume increased significantly, and breaking above the 40-day Volume Moving Average. This suggests some increased of capital inflow, and it will generally help lifting the market sentiment. Which, indirectly, a positive element for the performance of individual counters.

This week, we are looking at some Oil and Gas related counters:

DIALOG – 7277: Testing new high in an uptrend.

Chart 2: DIALOG – 7277 as at 30/03/2011.

As shown on chart 2, price of Dialog has been testing the RM2.36~RM2.42 resistance few times. Although price of Dialog retreated every time after being resisted by the resistance, it is still supported by the 14, 21, 31 EMA, and this suggests that the uptrend is still intact.

As indicated by A, price of Dialog is now testing the RM2.36~RM2.42 again, and if price could break above this level, it would be making a historical new high, thus the uptrend could continue. Technically, as long as price is still supported by the 14, 21, 31 EMA, it is a good idea to hold.

As for those whom are interested in taking up new position, an ideal buy signal would be a new formation of higher-low, or new high, and preferably with strong volume. As for those whom are already in position, as long as price is still rising, it is a good idea to practice the trailing stop method by using the 14, 21, 31 EMA, and gradually lifting the profit taking level or the cut loss level according by the 14, 21, 31 EMA.

Due to the flat movement of Dialog for the past two months, it is not advisable to use the 14, 21, 31 EMA for new investors whom are taking up new position. A more suitable base line should be at RM2.15. New investors should only be using the 14, 21, 31 EMA as a trailing stop when price started rising.

4 Q Rolling PER	35.05 times	Dividend Yield	1.34%
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.

Sapcres – 8575: Testing resistance.

Chart 3: Sapcres – 8575 as at 30/03/2011.

As shown on chart 3, since November, 2010, price of Sapcres has been staying in a trading range within the resistance of RM 3.75~ RM 3.85 and the support of RM 3.39~RM 3.40.

As indicated by A, price of Sapcres is now testing the RM 3.75~RM 3.85 resistance, and if price should break above this resistance, it would be making a new high of many years, and price could resumes its uptrend. Based on the current trading range condition, investors could take the support of RM3.39～RM3.40 as the last frontier, or the bottom line, and if price could stay above this level, it is still a good idea to hold.

As soon as price break above the resistance, then for those whom are holding could switch to apply the 14, 21, 31 EMA as a trailing stop method. This way, the trading risk will be reduced, and yet taking advantage of the uptrend.

4 Q Rolling PER	20.35 times	Dividend Yield	2.30%
Dividend		Dividend Yield	Net Profit Ratio
31/01/2010	8.50 sen	2.39%	7.25%
31/01/2009	7.00 sen	2.97%	5.23%
31/01/2008	5.00 sen	6.71%	3.32%
31/01/2007	2.00 sen	1.33%	3.46%
31/01/2006	2.00 sen	2.78%	-1.00%

Table 2: Sapcres – 8575, yearly dividend, dividend yield, and net profit ratio.

MHB – 5186: Testing resistance in an uptrend.

Chart 4: MHB – 5186 as at 30/03/2011.

As shown on chart 4, since the IPO, price of MHB has been trending up, and staying above the 14, 21, 31 EMA, which is serving as the dynamic support. Therefore, for those whom are already in position, it is a good ideal to continue to hold. As long as you lift your profit taking level higher according to the 14, 21, 31 EMA.

Right now, it is testing its new high of RM7.00 resistance. If price of MHB could break above this successfully, it would allow more upside room for the uptrend. For those whom are interested in taking up new position, an ideal buy signal would be a new formation of higher-low, preferably above the 14, 21, 31 EMA. Support for MHB are found at RM 6.30 followed by RM 5.70.

Conclusion:

It is said that most of the time, the stock market performance is usually thematic. For example, a few months back, Properties stocks were among the favorite of investors, but not all nearly 90 properties counter were trending up. For now, the outlook for oil and gas related industry remains positive, but out of 20+ O&G related counters, those that are trending down, or moving is sideways still outnumbered those that are trending up. One may wonder, out of many brands of television set, a consumer would spend a considerable time and effort to pick the best one, but sadly the same person might not be spending enough time to pick his O&G stock.

Pchem, Tenaga, Sozo

2011-04-18T08:52:00.003+08:00

Chart 1: KLCI as at 30/3/2011.

Revision of last week's case study: Pchem – 5183: Breaking new higher, continue its uptrend.

Chart 2: Pchem – 5183 as at 30/03/2011.

As indicated by A, price of Pchem broke above the RM 6.83 resistance, making a new high, and now price of Pchem is extending its uptrend. As price is rising, the 14, 21 ,31 EMA is also following, and therefore, for those whom are already in position, it is a good idea to continue to hold, as long as one should gradually lift the cut loss or profit taking level according to the 14, 21, 31 EMA. This way, it will gradually reduce trading risk, while maximizing the potential of the uptrend.

As for those whom are interested in taking up new position, an ideal buy signal would be a new formation of a higher-low, preferably with strong volume, and price remain above the 14, 21, 31 EMA, for if price should start rising again after the entry, one could immediately apply the trailing stop method by using the 14, 21, 31 EMA as a reference.

Tenaga – 5347: Remains in downtrend.

Chart 3: Tenaga – 5347 as at 30/03/2011.

Although the KLCI has broken away from the short term downtrend, price of Tenaga remains in a weakening trend. As shown on chart 3, price of Tenaga was supported by the RM 5.94~RM 6.05 for a few times and price rebounded from this support. However, despite the rebound, price of Tenaga as still resisted by the 14, 21, 31 EMA, which is still serving as the dynamic resistance, and this suggests that the technical outlook for Tenaga is still weak.

As indicated by A, price of Tenaga retreated on the 22nd of March, after being resisted by the 14, 21, 31 EMA, forming yet another lower-high, which is a sign of weakness. Technically, it has to break above the 14, 21, 31 EMA, in order to bring the technical outlook back to positive, and as for whether it could form an uptrend, it would have to form a higher-low, after the break out.

As a general rule, despite the improvement of the market sentiment in general, investors should still honor the rule of trading stocks in an uptrend, and avoid catching any falling stocks.

4 Q Rolling PER	9.25 times	Dividend Yield	4.29%
Dividend		Dividend Yield	Net Profit Ratio
31/08/2010	26 sen	2.94%	10.56%
31/08/2009	17.77 sen	2.22%	3.19%
31/08/2008	20 sen	2.53%	10.07%
31/08/2007	36.30 sen	3.65%	17.41%
31/08/2006	12 sen	1.31%	10.43%

Table 1: Tenaga – 5347, yearly dividend, dividend yield, and net profit ratio.

Sozo – 5187: Short term weakness.

Chart 4: Sozo – 5187 as at 30/03/2011.

As shown on chart 4, after falling below the 14, 21, 31 EMA on the 10th of March, price of Sozo remained in a downtrend, with the 14, 21, 31 EMA serving as the dynamic resistance. Although there was a rebound from RM0.75 on the 17th of March, price of Sozo was still resisted by the 14, 21, 31 EMA, and retreated afterward. Technically, it is still showing weakness for Sozo right now.

As indicated by A, price of Sozo is now testing the RM0.75 support, and if price should rebound from here, it would have to re-test the dynamic resistance again. If it could break above the dynamic resistance, it would break away from this weakness short term trend. But it does not mean it would reverse and form an uptrend immediately.

On the other hand, if price should break below the RM0.75 support, it would be making a two and a half month new low, and the technical outlook shall remains negative. Next support for Sozo is seen at RM 0.64.

Conclusion:

The increased of volume as a whole implies that investors participation and confidence is improving. It will generally help lift the market sentiment, and the performance of individual counters. One should be able to benefit from the increased of volume provided the counters show signs of an uptrend. However, despite the improvement of market sentiment, if one is still buying a counter breaking new low or staying in a downtrend, he would most likely be left out because he is aiming at a wrong target.

KLCI, Pchem, DIALOG ,JCY, MEDIA

2011-04-04T12:26:00.007+08:00

Although the aftermath of the nuclear crisis in Japan has not rested, global stock markets rebounded. Despite the rebound, some major indices are still exposed to the risk of forming a lower-high, which includes the KLCI.

Chart 1: KLCI as at 22/3/2011.

As indicated by A, the KLCI rebounded from the 1474~1480 support, and now testing the 14, 21, 31 EMA dynamic resistance. Meanwhile, total market volume started to increase, and if volume could break above the 40-day Volume Moving Average, and the KLCI breaks above the 14, 21, 31 EMA, the KLCI would have a better chance to break away from this weakening trend.

Understanding Volume (End)

Last two weeks, we mentioned the relationship between price and volume, including the numbers of sellers and buyers must be equal, et cetera. We will conclude the last portion of volume and price relationship in this article.

C: Price fall with low volume:

When price fall with lower volume, it means that the stock is most likely trending down or staying in a weakening consolidation. When the market is quiet, when most investors are staying on the sidelines, and at the same time, the market is lack of good news to stimulate the market sentiment, stock price is less likely to go up. Therefore, one should learn to identify these characteristic, and if volume should trend down with low volume, together with formation of lower-highs, it is best to avoid this downtrend.

Chart 2A: Price fall with low volume.

D: Price fall with strong volume.

Generally, when the market is hit by major negative news, stock price would fall with huge volume, and this is what we called a panic selling. When sellers are so afraid that they don't mind selling their stocks at lower price, they would quickly sell their stock to the the buyers at the next buyer price. These panic selling activities are usually short-term, but they will certain have an impact to the stock trend and investors confidence.

Chart 2B: Panic Selling with huge volume.　

E: Price stopped rising, while volume remains strong.

This is different from panic selling, where the panic selling is clearly visible, but as shown on chart 2C, when price stopped rising and volume is still strong, it implies that the stronger hands are off loading their shares to late comers, or the weaker hands, and this is usually not obvious, in fact, rather hard to notice. One should ask, if there are such strong inflow of volume (fresh capital), why wouldn't the sellers ask for any premium? Why must the sellers rush to sell their stocks?

Chart 2C: Price stop rising, volume remains strong.

This week's Case Studies:

Pchem – 5183: Uptrend remains intact.

Chart 3: Pchem – 5183 as at 22/03/2011.

As shown on chart 3, price of Pchem was resisted by the RM6.80~RM 6.83 resistance, and entered a sideways consolidation. Despite the resistance, the uptrend of the Pchem remains intact, while the 14, 21, 31 EMA is still serving as the dynamic support of the uptrend.

Technically, as long as price of Pchem could stay above the 14, 21, 31 EMA, investors could choose to hold, provided that he or she should lift the cutloss or profit taking level according to the 14, 21 ,31 EMA level, this will gradually reduce trading risk.

As for those whom are interested in taking up new position, it could be viewed as a buy signal if price should break above RM 6.80~RM6.83 resistance, and apply the 14, 21, 31 EMA as a trailing stop reference after entering. Of course, the break out should be accompanied by strong volume.

DIALOG – 7277: Testing Resistance.

Chart 4: DIALOG – 7277 as at 22/03/2011.

As shown on chart 4, price of Dialog was affected by the recent incident in Japan, as a form of a technical correction. However, price of Dialog remains above the 14, 21, 31 EMA dynamic support, and this means that the uptrend remains intact. For those whom are already in position, he or she could choose to hold, as long as price of Dialog remains above 14, 21, 31 EMA.

Meanwhile, as indicated by A, after being supported by the 14, 21, 31 EMA, price of Dialog started rising again, and now set to test the RM 2.36~RM 2.42 resistance. If price should break above the RM2.36~RM2.42 resistance, it would be making a historical new high. If the break out should be accompanied by strong volume, there is a good chance that the uptrend would prolong, with positive technical outlook.

4 Q Rolling PER	34.75 times	Dividend Yield	1.35%
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.

JCY – 5161: Remains in downtrend.

Chart 5: JCY – 5161 as at 22/03/2011.

As shown on chart 5, price of JCY rebounded last week, after being supported by the RM0.575 ~ RM 0.585. However, it is still testing the 14, 21, 31 EMA, which is still serving as the dynamic resistance. Technically, as long as price of JCY is still staying below the 14, 21, 31 EMA, the technical outlook for JCY shall remain weak. Furthermore, with the lower market participation, chances of a reversal is still slim.

Theoretically, the most ideal buy signal, is when price breaks above the 14, 21 ,31 EMA, and then forming a higher-low. On the contrary, if price should remain resisted by the 14, 21, 31 EME, and later break below the RM0.575~RM 0.585 support, it would make yet another new low.MEDIA – 4502: Short term downtrend remains intact.

Chart 6: MEDIA – 4502 as at 22/03/2011.

As shown on chart 6, since breaking below the 14, 21, 31 EMA on the 25th of January, price of Media has been staying below the 14, 21 ,31 EMA, thus the short term technical outlook for Media remained negative. Price of Media was supported by RM2.20 in the beginning of March, but after rebounding from RM2.20 support, price of Media is now testing the 14, 21, 31 EMA as indicated by A.

If price should remain resisted by the 14, 21, 31 EMA, and started falling again, it would form another lower-high, which suggests that the downtrend is still intact. If price should break below RM2.20 support, it would be making a near 6 months new low, and by then, it would trigger more selling pressure.

Technically, as long as price of Media is still resisted by the 14, 21 ,31 EMA, then investors should stay away from this counter, until a valid break out above the 14, 21, 31 EMA. If price should break above the 14, 21, 31 EMA, and later forms a higher-Low, it could be a positive reversal signal.

4 Q Rolling PER	8.95 times	Dividend Yield	4.33%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	10 sen	4.18%	16.45%
31/12/2009	10 sen	5.24%	26.18%
31/12/2008	25 sen	22.52%	11.01%
31/12/2007	0 sen	0.00%	16.98%
31/12/2006	0 sen	0.00%	15.05%

Table 2: MEDIA – 4502, yearly dividend, dividend yield, and net profit ratio.

Conclusion:

The above examples of case studies reinforced an important idea, which is to follow the trend. Trying to buy low during a downtrend is not the way. The idea of buy low sell high is easy to accept for this is human nature to buy things cheap. However, the prices of a stock trend is not governed by common sense, and this explains why we generally say that a few winners takes all the profit from most losers, because only few could make it.

KLCI, Genting, MRCB, Airasia

2011-04-04T12:20:00.006+08:00

After the earthquake and Tsunami, the nuclear crisis in Japan is the main concern of investors around the world, with last week's Nikkei 225 index was falling up to 2000 points or 20%, and the regional markets were severely affected too. However, the Malaysian market was mildly affected.

Chart 1: KLCI as at 16/3/2011.

As shown on chart 1, although the KLCI was also affected by the negative impact of the Japan nuclear crisis, the downside movement of the KLCI was rather insignificant. As indicated by A, the KLCI had once broken below the 1474 support, but it managed to return to above the support level and this shows that the support for the KLCI remains at 1474~1480. If the KLCI could hold up above this level, the KLCI could prolong its sideways consolidation.

But still, with the KLCI below the 14, 21, 31 EMA the technical outlook for the KLCI remains on the lower side. If the KLCI should break below the 1474 again, it would be making a half year new low.

Understanding volume – continue.

Last week, we discussed the relationship of volume with price movement. This week, we shall look deeper into their relationship and the effect caused.

A: Price gain with volume up.

When price goes up associated with the rising of volume, we theoretically say that there are increased of new buyers (greed) to replace the old sellers (fear). Not only that, these new buyers are mostly paying a higher price to get in, and old sellers are asking for more premium to get out. This is a good sign, especially for break out of resistance. Study Chart 1A.

Chart 1A: Price up with volume.

B: Price up but volume unchanged:

When price continues to go up, but volume remains unchanged, or there are no significant increased of volume, it is rather normal. This shows that there is still positive volume flow as new buyers are basically still paying higher price to take their shares from old sellers. Provided volume stays almost the same, it is fine. Another factor we must consider is that when price is getting higher, the buying power of the same money is less. Therefore, it is getter harder and harder to get the equal amount of shares for the same money. However, when it comes to a break out of an important resistance, significant increased of volume is still in favor.

Next week, we shall continue in exploring other combination of price and volume. Below are this week's case studies.

Genting – 3182: Short term weakness, testing RM10 support.

Chart 2: Genting – 3182 as at 16/03/2011.

As shown on chart 2, since breaking below the 14, 21, 31 EMA on the 7th of February, price of Genting has been staying in a short term weakness trend, whereas the 14, 21, 31 EMA is serving as the dynamic resistance. However, indicated by A, price of Genting remains supported by the RM10.00 psychological support level. Generally, investors are more likely to remember round number, and therefore, it is called psychological support.

If price should break below RM10.000, it would be making a 6 months plus new low. In other words, all investors whom had bought Genting in the last 6 months, no matter at a lower price or higher price, will be losing money, or turning their profit into losses. Therefore, it would evoke more selling pressure.

In short, when price breaks below the support, selling pressure will increase and therefore, not a good idea to pick up at that time, or it could be viewed as a signal to cut loss. In other words, as long as the price is still staying below the 14, 21, 31 EMA, it is a good idea to stay away from it.

4 Q Rolling PER	16.82 times	Dividend Yield	0.78%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	7.80 sen	0.75%	14.50%
31/12/2009	7.20 sen	1.14%	11.74%
31/12/2008	7.00 sen	1.89%	6.27%
31/12/2007	37 sen	0.98%	12.15%
31/12/2006	32 sen	0.97%	21.66%

Table 1: Genting – 3182, yearly dividend, dividend yield, and net profit ratio.

MRCB - 1651: Short term weakness.

Chart 3: MRCB - 1651 as at 16/03/2011.

As shown on chart 3, price of MRCB formed a Descending Triangle, with the L1 line being the dynamic resistance. Support is at RM 1.97~RM 2.00. A descending Triangle, is a consolidation pattern of price with weakness, for the L1 descending line is actually outlining the formation of lower-high, which is the early sign of a possible downtrend formation; while the support remains unchanged.

If price should break below the RM1.97~RM2.00 support, it would be making a 6 months new low. By then, it means more people will be losing money, and eventually creating more selling pressure. Technically, as long as price of MRCB is staying below the L1 line or the 14, 21, 31 EMA, the technical outlook for MRCB is expected to be weak, and it is not a good idea to buy right now. Next support is seen at RM1.77~RM 1.80.

If price should prolong it's sideways consolidation, price will eventually break away the L1 line, but it does not mean that price will form an uptrend reversal. Not until it forms a higher-low. Even so, investors should consider the overall market condition, volume et cetera.

4 Q Rolling PER	39.88 times	Dividend Yield	0.72%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	1.5 sen	0.66%	6.30%
31/12/2009	1 sen	0.73%	3.76%
31/12/2008	0 sen	0.00%	-7.18%
31/12/2007	0 sen	0.00%	4.51%
31/12/2006	0 sen	0.00%	6.20%

Table 2: MRCB - 1651, yearly dividend, dividend yield, and net profit ratio.

Airasia – 5099: Short term weakness.

Chart 4: Airasia – 5099 as at 16/03/2011.

As shown by chart 4, the price movement of Airasia is rather similar to the price movement of MRCB, and they both are staying below the L1 descending line as well as the 14, 21, 31 EMA. The short term view of Airasia is weak, but it is still above the RM2.40 support, thus the current condition is not devastating.

As indicated by A, price of Airasia tested the 14, 21, 31 EMA and the L1 line after rebounding from the RM 2.40 support. If price should break away from the L1 line, it would help the technical outlook of Airasia, back to neutral from the short term bearish biased movement. However, it does not mean a bullish reversal right away, not until price forms a higher-low.

On the other hand, if price should break below RM2.40, it would be making a near 6 months new low, thus creating more selling pressure, as all the investors whom had bought within this 6 month will be making losses, and turning their profit into losses. Therefore, it will be a sell signal.

4 Q Rolling PER	6.58 times	Dividend Yield	0.00%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	0 sen	0.00%	26.72%
31/12/2009	0 sen	0.00%	17.27%
31/12/2008	0 sen	0.00%	-17.87%
31/12/2007	0 sen	0.00%	38.90%
31/12/2006	0 sen	0.00%	31.07%

Table 3: Airasia – 5099, yearly dividend, dividend yield, and net profit ratio.

Conclusion:

Most of the time, when stock price forms a downtrend, it will first form a lower-high, followed by breaking a new low. However, the behavior of stock price varies with different stocks, and to identify these behavior, is actually not easy. That's why, it takes years to master this skill, and most failed.

KLCI, Axiata, CIMB, UEMland

2011-04-04T12:16:00.004+08:00

Chart 1: KLCI as at 16/3/2011.

But still, with the KLCI below the 14, 21, 31 EMA the technical outlook for the KLCI remains on the lower side. If the KLCI should break below the 1474 again, it would be making a half year new low.

Understanding volume – continue.

Last week, we discussed the relationship of volume with price movement. This week, we shall look deeper into their relationship and the effect caused.

A: Price gain with volume up.

Chart 1 Airasia : Price up with volume.

B: Price up but volume unchanged:

Next week, we shall continue in exploring other combination of price and volume. Below are this week's case studies.

Axiata – 6888: Possible Head and Shoulders Top.

Axiata – 6888 as at 16/03/2011.

The L1 line of Chart 2 outlines the formation of lower-high of Axiata, since 9th of March, and the technical outlook for Axiata remains negative since then. Fortunately, price of Axiata is still supported by the RM 4.70 support, thus the downtrend is not devastating. Together with the L1 line and the RM4.70 support, it forms a Descending Triangle, and the descending Triangle is a consolidation pattern with weakness, for it shows that price already formed lower-high, but support remains unchanged.

Meanwhile, over the course of 1 and a half month, price of Axiata is forming a Head and Shoulders Top. Technically, a Head and Shoulders Top pattern implies that it is the temporary peak of Axiata, and the risk of a reversal is high, and the key factor of the reversal would be a break down below its neck line, the RM 4.70 support.

Nevertheless, regardless of the fancy name of the given pattern, the right edge of a Head and Shoulder top is always a Descending Triangle, and therefore, provided one could identify this pattern and stay away from its weakness, he is saved. As for investors whom are still holding, it is a good idea to refer to the long term weekly chart, and if price should break below the weekly 14, 21, 31 EMA, it means that the long term uptrend has been violated, thus a sign to exit.

Of course, there is still a possibility that Axiata could stay above RM 4.70, and prolong its sideways consolidation. By then, it would have broken away from the L1 descending line, thus reducing the risk of a bearish reversal.

4 Q Rolling PER	22.71 times	Dividend Yield	2.10%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	10 sen	2.07%	11.33%
31/12/2009	0 sen	0.00%	12.61%
31/12/2008	0 sen	0.00%	4.39%

Table 1: Axiata – 6888, yearly dividend, dividend yield, and net profit ratio.

CIMB – 1023: Short term weakness and testing RM 7.80 support.

Chart 3: CIMB – 1023 as at 16/03/2011.

As indicated by a, price of CIMB remains in a short term downtrend after breaking below the 14, 21, 31 EMA on the 21st of January. Therefore, the technical outlook for CIMB remains weak. It is a good idea to stay away from stocks which have negative technical outlook.

Meanwhile, price of CIMB is testing the RM 7.80 support and this is a support since August, 2010. If price should break below this support, it would be making a 7 months new low, and it means that all investors whom had bought within this 7 months will be making losses, or turning their profit into losses, thus increasing the selling pressure. Again, as long as price of CIMB is still trending below the 14, 21, 31 EMA, it is a not a good idea to “buy low”.

4 Q Rolling PER	16.16 Times	Dividend Yield	3.29%
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: UEMland – 5184: Still testing RM2.64 support.

Chart 4: UEMland – 5184 as at 16/03/2011.

Last week, we mentioned UEMLand's Descending Triangle, with weakness. Until now, the technical condition of UEMLand is unchanged, while the Descending Triangle remains intact. But, right now, price of UEMLand is staying at the edge of the Triangle, and usually the break out is not far away from now.

If price should break below the RM2.60 support, it would increase the selling pressure and by then, the 14, 21, 31 EMA would serve as the dynamic resistance, with negative technical outlook. Therefore, when price break below RM2.60, it is a signal to cut loss. On the other hand, if price of UEMland prolongs its consolidation, it would eventually break away the L1 line, and by then, the Descending triangle would be dysfunctional. In short, right now is not a good time to make any trading decision until a valid break out away from the L1 line.

4 Q Rolling PER	45.83 times	Dividend Yield	0.00%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	0 sen	0.00%	41.42%
31/12/2009	0 sen	0.00%	28.44%
31/12/2008	0 sen	0.00%	14.50%

Table 3: UEMland – 5184, yearly dividend, dividend yield, and net profit ratio.

Conclusion:

As the market is generally affected by negative impact of the Japan nuclear incident, many counters are falling and price is definitely lower. However, this does not mean that it is a good time to pick up some of the cheap stocks, and if one should do this, he or she is actually going against the trend.

KLCI, DIALOG, Pchem, OSK

2011-04-04T12:01:00.005+08:00

Last week, the KLCI broke above the T1 downtrend line as well as the 14, 21, 31 EMA, breaking away from the short term downtrend. However, after the break out, the KLCI did not form a reversal right away.

Chart 1: KLCI as at 9/3/2011.

As indicated by A, the KLCI attempted to break the 1525 resistance line, but failed. Therefore, the KLCI is, at most, trading in a trading range. Meanwhile, as indicated by B, total market volume remains low. Generally, volume has to be above the 40-day Volume Moving Average, in order to suggests that the market is fueled with sufficient participation, which then only have a chance to push the market to a higher level.

What is volume:
It is a common mistake that investors believe that more buyers than seller, price would go up, or the reverse. However, this is totally incorrect. In the process of a complete trade, the number of buyers must be equal with the number of sellers. If any one who wishes to sell his share, there must be an equal amount of shares which the opposite buyer is willing to buy, then only the seller could off load his shares. Basically, volume is a record of the frequency of shares changing ownership.

If volume was only there to record the changes of ownership, it is not much of a meaning. However, when we combine the analysis of price with volume, it provides a better picture of the emotions of traders involved. For example, if a stock price opened at RM1.00 and closed at RM1.10, it rose 10 cents. If today's volume is 10,000 shares, it means there were 10,000 shares sold to new buyers. Then you should ask the next question, did the buyer pay a higher price to get the 10,000 from the existing sellers? The answer is yes.

Let's take a deeper look into the scenario. What is the intention of sellers? Seller sell because they are fearful. They are afraid that price may not go up further more, or price could start falling. It does not matter if the sellers are taking profit or cutting losses, the moment they wanted to sell, they are in fear. On the contrary, what is the intention of buyers? Buyers take risk to buy shares because they are greedy. Whether they are buying new position or topping up positions, they must believe that price could go higher or else, who would want to take risk? Next, we shall look at the price changes as a result of the trading between a fearful seller and a greedy buyer. If price should ended higher after trading, did the seller ask for a higher premium? If so, the buyers must have paid, willingly, a higher price to get their share from the sellers. In this case, who initiated the trade? It is the buyer. On the opposite, if price ended lower, it was the fearful seller who initiated the trade. Therefore, we always mention that when price fall with huge volume, it means the selling pressure is stronger.

The above explanation only illustrate the changes of price, in result of the conflict of buyer's greed and seller's fear for 1 day. How does this affect the coming movement of price? We will continue this discussion next week.

DIALOG – 7277: Remains in uptrend.

Chart 2: DIALOG – 7277 as at 09/03/2011.

As shown on chart 2, price of Dialog managed to break above the RM2.30 resistance, after the previous attempt on the 18th of February. At the moment, the 14, 21, 31 EMA is still serving as the dynamic support, thus the technical outlook for Dialog is still positive. (As indicated by A)

Meanwhile, as indicated by B, when price of Dialog breaks above the RM2.30 resistance, it was also associated wit huge volume, and this suggests that there was a strong inflow of fresh capital to offset the selling pressure, and most importantly, these new buyers are paying a higher price for the seller, which is a positive sign.

It is a good idea to hold for right now, as long as investors could lift the cut loss level or profit taking level gradually higher according to the 14, 21, 31 EMA, this way, the risk of trading will be lower.

4 Q Rolling PER	35.81 times	Dividend Yield	1.31%
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.

Pchem – 5183: Breaks new high, remains in uptrend.

Chart 3: Pchem – 5183 as at 09/03/2011.

As indicated by A, price of Pchem broke above the RM 6.40 resistance on the 8th of March, breaking a new high. Therefore, it is now extending its existing uptrend. Meanwhile, as indicated by B, when price broke new high, volume also increased significantly, and this has strengthen the break out signal, suggesting more greedy buyers replacing fearful selling whom are taking profit.

Technically, as long as price could stay above the 14, 21, 31 EMA, the uptrend shall remain intact. Please note that after a valid break out above the resistance, it is not necessary to have the same strong volume, as indicated by B, to sustain the existing uptrend.

OSK – 5053: Remains in short term downtrend.

Chart 4: OSK – 5053 as at 9/03/2011.

As shown on chart 4, since falling below the 14, 21, 31 EMA on the 17th of January, price of OSK has been trending down, and despite a few attempt of rebounds, the downtrend remains intact, with the 14, 21, 31 EMA serving as the dynamic resistance.

After falling for about two months, price of OSK found a support at RM1.60. However, as indicated by A, price of OSK is still resisted by the 14, 21, 31 EMA dynamic resistance. If price should break below the RM 1.60 support, it would be making a 4 months new low, and it would further dampen the weakening technical outlook.

Meanwhile, please note that as indicated by B, volume is usually lower when price is falling. Without sufficient inflow of fresh capital to offset the selling pressure, price of OSK is less likely to break away from this downtrend. Next support is seen at RM1.50.

4 Q Rolling PER	14.18 times	Dividend Yield	4.41%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	7.5 sen	4.36%	11.62%
31/12/2009	7.5 sen	6.10%	13.73%
31/12/2008	7.5 sen	7.58%	16.59%
31/12/2007	20 sen	8.62%	21.38%
31/12/2006	12.5 sen	6.38%	23.84%

Table 3: OSK – 5053, yearly dividend, dividend yield, and net profit ratio.

Conclusion:

"More buyers than sellers, price goes up." This saying is not only outdated, it is totally wrong because in the process of trading, the number of buyers must be the same with sellers. Price changes due to the imbalanced of the buyers' greed and sellers' fear. The act of buying or selling is more emotional than rational. However, buyers and sellers are always in total conflicts, where buyers want to buy as low as possible, and the reverse is true for sellers. Volume marks the number of times of share changing owners, and the higher of the volume, register a stronger memory of price, thus giving a deeper impression that will affect the future price movement.

KLCI, TM, Topglov, UEMland

2011-04-04T11:53:00.004+08:00

Chart 1: KLCI as at 9/3/2011.

TM – 4863: Uptrend remains intact.

Chart 2: TM – 4863 as at 09/03/2011.

Despite the correction of the KLCI which has pulled down many of the blue chip counters, price of TM not only unaffected, it is still trending in its short term uptrend. As shown on chart 2, price of TM forms higher-low above the T1 uptrend line, and it has been making new highs, which fulfilled the characteristic of a healthy uptrend.

Technically, as long as price of TM could stay above the T1 uptrend line or the 14, 21, 31 EMA dynamic support, the technical outlook for TM shall remain positive. Therefore, for those whom are already in position, it is a good idea to hold, as long as you could gradually lift your cut-loss or profit taking level higher, accordingly to the 14, 21, 31 EMA, to reduce trading risk.

As for those whom are interested in taking up new position, it is better to wait for the next formation of higher-low, then only consider to buy. However, it is important that one should consider the broad market condition before buying any stock right now, for the market sentiment is still at cautious, while market volume is still low. Actually, chances of the KLCI moving sideways is higher than forming an uptrend right now.

4 Q Rolling PER	11.73 times	Dividend Yield	6.56%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	26.10 sen	6.78%	13.72%
31/12/2009	23 sen	6.87%	7.47%
31/12/2008	26.25 sen	8.52%	9.13%
31/12/2007	113 sen	10.09%	14.28%
31/12/2006	46 sen	4.72%	12.62%

Table 1: TM – 4863, yearly dividend, dividend yield, and net profit ratio.

Topglov - 7113: Still in short term downtrend.

Chart 3: Topglov – 7113 as at 9/03/2011.

With the exception of last two months correction, the market in general was doing well. However, as shown on chart 3, price of Topglov was still trending down.

From October to December, 2010, price of Topglov has attempted to break the RM5.80 resistance many times, but as soon as price was getting closer to the resistance level, selling pressure pushed price lower. Eventually, it broke away from the sideways movement, and started a downtrend, as indicated by T1.

Readers can clearly see that the T1 downtrend line is outlining the formation of lower-high, which is the sign of a downtrend. Although there were many rebound during the downtrend, price of Topglov failed to break above the T1 downtrend line, and even broke below the RM4.90~RM 5.00 support, marking a new low. Therefore, it is not wise to buy at this moment. In additional, please note that it is normal to have lower volume during a downtrend, which is also another sign of a downtrend.

4 Q Rolling PE	8.43 times	Dividend Yield	4.70%
Dividend		Dividend Yield	Net Profit Ratio
31/08/2010	23 sen	4.04%	11.80%
31/08/2009	22 sen	3.17%	11.04%
31/08/2008	11 sen	2.71%	8.01%
31/08/2007	9.22 sen	1.31%	8.38%
31/08/2006	9 sen	1.04%	7.90%

Table 2: Topglov – 7113, yearly dividend, dividend yield, and net profit ratio.

UEMland – 5184: Forming a Descending Triangle.

Chart 4: UEMland – 5184 as at 9/03/2011.

As shown on chart 4, price of UEMland formed a Descending Triangle Consolidation pattern, with the L1 line outlining the lower-high formation, and L2 (RM 2.64) being the current support level.

The Descending Triangle is a consolidation pattern with some negative bias, as the price already formed lower-high, but fortunately, it has not broken below its support, thus not creating a strong selling pressure yet. As indicated by A, price of UEMLand rebounded slightly from L2 line, and now is set to test the L1 line. If price should break above the L1 line, it would break away from the negative biased consolidation pattern, but it will not immediate form an uptrend, unless price could form a higher-low. On the contrary, if price should break below the L2 support, the risk of forming a downtrend would be higher.

Meaning, it is noticeable that the volume is on the higher side during the Triangle Consolidation, and this is not normal. Usually, when price should consolidate, volume is lower, as investors are being cautious while waiting for a clearer signal.

As indicated by B, trading volume for UEMland has been seen on the higher side for the past 1 month, and this suggests that some increased of buying interests to replace some fearful selling reducing their position. However, a higher volume register a higher intensity of the conflict between greedy buyers and fearful sellers. Therefore, should volume increases during a consolidation, it will mark a stronger memory at this consolidation level. (RM 2.60~RM 2.80.)

In other words, if price should later break above the L1 line, then RM2.60~RM2.80 would become a strong reference of support later. On the other hand, if price should break below RM2.60~RM2.80, then this will mark a strong resistance level, for this is going to be a 'break-even' level for many of the greedy buyers. In short, if price should break below RM2.60, it is a good idea to cut loss.

4 Q Rolling PER	47 times	Dividend Yield	0.00%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	0 sen	0.00%	41.42%
31/12/2009	0 sen	0.00%	28.44%
31/12/2008	0 sen	0.00%	14.50%

Table 3: UEMland – 5184, yearly dividend, dividend yield, and net profit ratio.

Conclusion:

"More buyers than sellers, price goes up." This saying is not only outdated, it is totally wrong because in the process of trading, the number of buyers must be the same with sellers. Price changes due to the imbalanced of the buyers' greed and sellers' fear. The act of buying or selling is more emotional than rational. However, buyers and sellers are always in total conflicts, where buyers want to buy as low as possible, and the reverse is true for sellers. Volume marks the number of times of share changing owners, and the higher of the volume, register a stronger memory of price, thus giving a deeper impression that will affect the future price movement.

KLCI, CIMB, MAYBANK, PBBANK

2011-04-04T11:46:00.006+08:00

The KLCI managed to find its support at 1480, and tested the T1 downtrend line. Technically, as long as the KLCI is still staying within the T1 and T2 downtrend line, the technical outlook shall remains negative.

Chart 1: KLCI as at 2/3/2011.

As indicated by A, other than the T1 downtrend line, the 14, 21, 31 EMA, is still serving as the dynamic resistance to the KLCI and in other words, the KLCI has to also break above the 14, 21, 31 EMA in order to break away from the downtrend movement. Although a break out above the 14, 21, 31 EMA would signal a break away from the downtrend, it does not necessary mean that the KLCI would immediately reverse and form an uptrend, and there is still a good chance that the KLCI would form a sideways consolidation as mentioned in last two weeks articles. In short, if the KLCI could stay in a consolidation above the 1480~1500, the new inflow of capital will gradually neutralize some selling pressure.

Meanwhile, as indicated by B, total market volume remains low recently, below the 40-day Volume Moving Average. This suggests that the market participation was low, as investors are being cautious, and this also implies that the investors confidence is low. Not only that, over the last few trading days, loser significantly outnumbered winners, and this reflects the overall negative market mood.

Despite the low participation from investors, the KLCI, or the market as a whole is still not showing sign of a bearish market signs, and it is still too soon to call for a bear market. As long as the KLCI could stay in a sideways consolidation, preferably above 1480, and the weak market sentiment would gradually neutralizes, and the KLCI could gear-up for a new movement; and if the new movement of the KLCI or the whole market should be a positive one, it would be time to pick up some stocks again.

Our case studies will be focusing on banking stocks this week.

Revision of last week's case study: CIMB – 1023: Remains in short term downtrend.

Chart 2: CIMB – 1023 as at 02/03/2011.

As shown on chart 2, price of CIMB remains resisted by the 14, 21, 31 EMA dynamic resistance, thus suggesting that the short term downtrend remains intact. Last week, CIMB has a low reaching RM7.84 and as it was getting closer to the RM7.80 support, it rebounded. This suggests that the support for CIMB is still at RM 7.80~RM 7.90.

Although price of CIMB was supported by the RM7.80 ~RM7.90 level, it does not mean that the this is the lowest level which CIMB could go. In fact, it is highly risky if any one should attempt to catch any bottom for now. Technically, price of CIMB has to break above the 14, 21, 31 EMA, and later forming a higher-low, then only it is a reversal signal.

Nevertheless, if price of CIMB should remain resisted by the 14, 21, 31 EMA, then it would re-test the RM7.80~RM7.90 support, and if price should break below this support, it would be making a 4 months plus new low, and the technical outlook shall remains negative.

4 Q Rolling PER	16.33 times	Dividend Yield	3.26%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	26.07 sen	3.23%	29.81%
31/12/2009	18.5 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 1: CIMB – 1023, yearly dividend, dividend yield, and net profit ratio.

Maybank – 1155: In sideways consolidation.

Chart 3: Maybank – 1155 as at 02/03/2011.

Although price of Genting was affected by the recent selling down of the Asian markets, its price retreat was not severe, and it managed to stay above RM8.40~RM8.50 support. Therefore, it has not formed any downtrend, only a sideways consolidation. However, despite the sideways consolidation, a lower-high formation was seen and therefore, still suggesting a minor weakness for Maybank. Technically, to buy at this condition, the risk is still high.

As for those whom had already bought this counter earlier at a lower price, it is a good idea to hold, for the long term uptrend for Maybank is still intact. As shown on chart 3A, price of Maybank is still supported by the 14, 21, 31 weekly EMA, which has been serving as the long term uptrend dynamic support since May of 2009. Long term investors could gradually lift their profit taking level according toe the 14, 21, 31 Weekly EMA, to reduce trading risk while holding for the maximum potential of the uptrend.

Chart 3A: Maybank – 1155 Weekly chart.

4 Q Rolling PER	15.04 times	Dividend Yield	6.34%
Dividend		Dividend Yield	Net Profit Ratio
30/06/2010	55 sen	6.77%	20.57%
30/06/2009	8 sen	1.36%	3.93%
30/06/2008	52.5 sen	7.45%	18.13%
30/06/2007	80 sen	6.67%	20.95%
30/06/2006	85 sen	7.94%	22.07%

Table 2: Maybank – 1155, yearly dividend, dividend yield, and net profit ratio.

Pbbank - 1295: Remains in long term uptrend.

Chart 4: Pbbank - 1295 as at 2/03/2011.

Out of many big cap banking stocks, the least affected counter is Public Bank, besides Hong Leong Bank. As shown on chart 4, price of Public Bank was having a retreat, but the overall uptrend remains unaffected.

Generally, Public Bank is one of the favorite pick for long term investors as well as many fund managers, due to its stability of price as well as consistency of dividend. Therefore, for long term investors, it is a good idea to hold this stock, as long as one should gradually lift the trailing stop level according to the 14, 21, 31 Weekly EMA, and this way, the long term investors could tap into the long term capital gain, while receiving a consistent dividend income, and also gradually reduce trading risk.

Please note that since May of 2009, price of Public Bank uptrend has been supported by the 14, 21, 31 Weekly EMA, and until now, the 14, 21, 31weekly EMA is still holding the uptrend of Public Bank firmly. As for those whom are interested in taking up new position, it is a good idea to wait for a market sentiment to return to positive, before picking up any counters.

4 Q Rolling PER	14.96 times	Dividend Yield	4.45%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	58 sen	4.35%	27.62%
31/12/2009	55 sen	4.55%	25.91%
31/12/2008	55 sen	6.21%	24.58%
31/12/2007	75 sen	6.82%	22.22%
31/12/2006	60 sen	7.74%	22.89%

Table 3: Pbbank - 1295, yearly dividend, dividend yield, and net profit ratio.

Conclusion:

At any given moment, an investor should always be prepared, for the good and for the bad things. More importantly, he or she has to be self-disciplined, and must not be seduced by “low priced stocks”. One would not be surprised to realize that the market was never wrong in the past, nor in the future, it was the traders own mistake by not respecting the direction of the market, by going against with the flow of the market.

KLCI, KLK, IOICORP, GENP

2011-04-04T11:40:00.004+08:00

Chart 1: KLCI as at 2/3/2011.

Our case studies will be focusing on plantation stocks.

Revision of last week's case study: KLK – 2445: Forming short term downtrend.

Chart 2: KLK – 2445 as at 02/03/2011.

As shown on chart 2, price of KLK fell blow the RM21 support, and touched its low at RM19.20 last week. However, after being over-sold, price of KLK rebounded and managed to return to above RM20.00, and RM20 is now the current support. (Study A)

Despite the short term over-sold condition, the immediate outlook for KLK is still on the negative side, as it has formed a lower-high, which is an early sign of a downtrend formation. If price of KLK should remains resisted by the downtrend line (dotted line), or the 14, 21, 31 EMA dynamic resitance, then the negative technical outlook shall continue.

The RM20 support was formed since October 2010, and if price should break below this support, it would be making a 4 months plus new low, which would eventually trigger more selling pressure. In short, price of KLK has to break above the 14, 21, 31 EMA, in order to steer away from this short term downtrend.

4 Q Rolling PER	20.08 times	Dividend Yield	2.96%
Dividend		Dividend Yield	Net Profit Ratio
30/09/2010	60 sen	3.00%	13.51%
30/09/2009	40 sen	2.90%	9.20%
30/09/2008	70 sen	7.29%	13.25%
30/09/2007	50 sen	3.79%	13.70%
30/09/2006	50 sen	4.59%	11.06%

Table 1: KLK – 2445, yearly dividend, dividend yield, and net profit ratio.

IOIcorp - 1961: Remained in short term downtrend.

Chart 3: IOIcorp - 1961 as at 2/03/2011.

As shown on chart 3, despite price of IOIcorp rebounding from the RM5.40 support, the immediate technical outlook remains on the negative side, as the 14, 21, 31 EMA is still serving as the dynamic resistance. Thus the short term downtrend remains intact.

If price should being to retreat after resisted by the 14, 21, 31 EMA, it would form another lower-high, which is a characteristic of a downtrend. At the moment, there is no ideal buy signal for in order to break away from the short term downtrend, price of IOIcorp has to first break above the 14, 21, 31 EMA, then forming a higher-Low, then only it is an ideal buy signal.

Nevertheless, if price should stay in the downtrend, and later break below the RM5.30 support, it would be making a 4 months plus new low, and the selling pressure would likely to be higher.\

4 Q Rolling PER	16.75 times	Dividend Yield	3.06%
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.

GENP – 2291: Short term downtrend still intact.

Chart 4: Genp - 2291 as at 2/03/2011.

As shown on chart 4, after breaking below the 14, 21, 31 EMA in January, price of GENP has been staying in a short term downtrend, with the 14, 21, 31 EMA serving as the dynamic resistance. Technically, the immediate technical outlook for GENP shall stay negative as long as price of GENP is still resisted by the 14, 21, 31 EMA.

As shown on the chart above, price of GENP is testing the RM7.40~RM 7.50 support, and this was a new high level on the 5th of August, 2010. Previous, it was a resistance for GENP, until a break out above this level, it reversed its role to becoming a support. If price of GENP should remain supported by RM7.40~RM 7.50, there is a chance for GENP to consolidate, but the short term downtrend shall remains intact, unless price of GENP could successfully break above the 14, 21, 31 EMA.

When price rebound from a downtrend, it is not really the best time to buy. If price should remains resisted by the 14, 21, 31 EMA and started falling again, it is viewed as a good timing to cut loss and reduce losses. Technically, price has to break above the 14, 21, 31 EMA, and then forming a higher-low, then only it is an ideal buy signal.

4 Q Rolling PER	18.01 times	Dividend Yield	1.62%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	12.5 sen	1.57%	32.80%
31/12/2009	9 sen	1.46%	31.19%
31/12/2008	10 sen	2.82%	36.03%
31/12/2007	14 sen	1.62%	37.96%
31/12/2006	7 sen	1.64%	29.68%

Table 3: Genp - 2291, yearly dividend, dividend yield, and net profit ratio.

　
Conclusion:

Any breakout above the resistance, or below the support, does not necessary form a reversal of trend immediately. It takes time to form a reversal, for people need time to accept the turning of the direction. In other words, the market need more and more people buying and starting to make money, to create more greed and buying interests. On the contrary, we need more people to buy but loss money, and later feeling regret, then only a downtrend could form. The period between uptrend and downtrend, is the trendless fluctuation of price, and this is where it forms Triangles, Rectangular, or sort of patterns, called a consolidation; and this period will be the hardest challenge to most investors whom would put their patience and perseverance to a test.

KLCI, CIMB, RHBCAP, IOICORP

2011-04-04T11:34:00.004+08:00

Due to worries in Libya as well as China raising interest rate, the Asian markets were affected, and many counters of local market are also affected. Especially, on the 22nd of February, there were 880 counters losing. (There were 905 counters losing on the 10 of March, 2008). Investors could do a simple math and figure the probabilities of picking a winner when losers outnumbered winner in such scale.

Chart 1: KLCI ast at 23/2/2011.

As indicated by A, the KLCI tested the T1 downtrend line, and also the 14, 21, 31 EMA dynamic resistance, and the KLCI retreated, and resumed its downtrend, within the downtrend channel of the T1 and T1 lines. Technically, provided that the KLCI is still trending below the 14, 21, 31 EMA, the technical outlook is still negative.

Although the KLCI is still trending down in the downtrend channel, it has not broken 1500 psychological support level. We would like to remind our readers that the characteristic of a downtrend formation is lower-High, and later new low. This is because, when price breaks new low, it means more investors (including those whom are already in profit) will be losing money, or turning their profit into losses. As a result, it will trigger more selling pressure, and create more negative memory in the downtrend.

As mentioned last week, if the KLCI could find its support above 1500, then the KLCI or the market would have a chance to temporary prevent the downtrend for getting worse, by forming a sideways consolidation. And if so, after a while, the new inflow of fresh capital will eventually neutralize some selling pressure, and then, the KLCI or the market would have a better position to start a new trend. In other words, if the KLCI could stay above 1480~1500, the bear is still away from sight.　

CIMB – 1023: Short term downtrend remains intact.

Chart 2: CIMB – 1023 as at 23/02/2011.

As shown on chart 2, since breaking below the T1 uptrend line, price of CIMB has been falling, and forming a short term downtrend, and the 14, 21, 31 EMA is serving as the dynamic resistance. Technically, provided that price is still below the 14, 21, 31 EMA, the technical outlook is still on the negative side. Despite last week's rebound, price of CIMB was still resisted by the 14, 21, 31 EMA, as indicated by A, forming a lower-high, and the short term downtrend remains intact.

Next support for CIMB is at RM7.80~RM7.90, and this is a support since October, 2010, and also the 50% Fibonacci Retracement Line by calculating using the low of RM 6.58 and the high of RM9.17.

Generally, it is likely that price could temporary find its support at RM 7.80. However, it is important not to misunderstand the meaning of a support. A support does not mean that it will be the lowest price that price could go, but instead, it only implies a possible level of a rebound, and hopefully after a rebound, price could move sideways and if price could move sideways, over time, new inflow of capital could neutralize some selling pressure. However, as of now, if price should stay below the 14, 21, 31 EMA, there is no buy signal, until price of CIMB should form a higher-low.

4 Q Rolling PER	11.41 times	Dividend Yield	2.26%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2009	18.5 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%
31/12/2005	15 sen	2.63%	17.51%

Table 1: CIMB – 1023, yearly dividend, dividend yield, and net profit ratio.

Rhbcap – 1066: Short term downtrend.

Chart 3: Rhbcap – 1066 as at 23/02/2011.

As shown on chart 3, price of RHBCAP rebounded from RM7.80 support, but failed to break above the 14, 21, 31 EMA, forming yet another lower-high. As indicated by A, if price should remains resisted by the 14, 21, 31 EMA, the downtrend shall remain intact.

Again, a downtrend characteristic is price forming lower-high first, then breaking below a support, forming a new low. Therefore, if price of RHBCAP should later break below RM7.80, it would be making a 4 months new low, and more downside movement is expected for RHBCAP.

While it may seem like a discount with price falling, and some untrained investors might take is as a good time for some bargain buying. It is important for us not to forget the effect of a new low, and consider those whom are trapped in the new low, the losers.

In reality, when price breaks new low, more investors are losing money, even those whom were making profit are now turning their profit into losses. Therefore, selling pressure is expected to be high.

Take the example of RHBCAP, if price should break below RM7.80, then all investors whom had position for the last 4 months will be losing money, and their original intention of making money will slowly be replaced by a new intention, unconsciously, which is to 'break even'.

4 Q Rolling PER	12.27 times	Dividend Yield	3.26%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	26.38 sen	3.23%	23.10%
31/12/2009	22.45 sen	4.25%	22.14%
31/12/2008	19.60 sen	5.03%	17.48%
31/12/2007	13.60 sen	3.66%	21.44%
31/12/2006	8.00 sen	2.34%	7.96%

Table 2: Rhbcap – 1066, yearly dividend, dividend yield, and net profit ratio.

IOICorp - 1961: Short term Dowtnrend.

Chart 4: IOIcorp - 1961 as at 23/02/2011.

As shown on chart 4, since breaking below the 14, 21, 31 EMA on the 21st of January, price of IOIcorp has been forming a short term downtrend, with the 14, 21, 31 EMA serving as the dynamic resistance. Technical outlook for IOIcorp is on the negative side.

Although price of IOIcorp was recently supported by RM5.30~RM5.40, the downtrend remains intact, as indicated by A, price formed another lower-high at 14, 21, 31 EMA. If price should later break below RM 5.30~RM5.40 support, it would be making a 4 months new low, which would trigger more selling pressure, and more negative memory. Therefore, a wise thing to do is to avoid this stocks unless it could break above the 14, 21, 31 EMA, and form a higher-low. Nevertheless, next support for IOIcorp is at RM 5.20 and followed by RM5.00.

4 Q Rolling PER	16.54 times	Dividend Yield	3.10%
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 3: IOIcorp - 1961, yearly dividend, dividend yield, and net profit ratio.

Conclusion:

If the KLCI should break below 1480 support, and the above mentioned stocks were to break below their support, they would have made a 4 months new low, all together (more blue chips stocks are testing their 4 months support as well). Eventually, they will create a same reaction to the market in general, by triggering more selling. Therefore, we as an individual investor should always following the market trend, and avoid going against this massive movement.

KLCI, KLK, Genting, AXIATA

2011-04-04T11:28:00.005+08:00

Chart 1: KLCI ast at 23/2/2011.

KLK – 2445: Testing important support.

Chart 2: KLK – 2445 as at 23/02/2011

As shown on chart 2, price of KLK has tested the RM22.98 (Rounding up to RM23) a few times, but still it failed to break above this resistance, and price of KLK started to decline after that. As indicated by A, price of KLK is now testing the RM20~RM21 support level, and this is a support for KLK since December, 2010.

If price of KLK should remain supported by RM20~RM21, it is likely that the sideways consolidation could extend, and as for those investors whom had bought earlier and at a lower price, they could choose to hold their position in profit. However, if price should break below the RM20 support, it means that all investors whom had bought in December, 2010, will eventually loss money, and this will trigger more selling as some of these investors might want to cut loss, or some are breaking even. In short, if the support is violated, more downside movement is likely for KLK.

4 Q Rolling PER	20.89 times	Dividend Yield	2.85%
Dividend		Dividend Yield	Net Profit Ratio
30/09/2010	60 sen	3.00%	13.51%
30/09/2009	40 sen	2.90%	9.20%
30/09/2008	70 sen	7.29%	13.25%
30/09/2007	50 sen	3.79%	13.70%
30/09/2006	50 sen	4.59%	11.06%

Table 1: KLK – 2445, yearly dividend, dividend yield, and net profit ratio.

Genting – 3182: Short term Downtrend.

Chart 3: Genting – 3182 as at 23/02/2011.

After touching its peak of RM11.98 on the 13th of January, price of Genting has been falling since then, forming a short term downtrend, and the 14, 21, 31 EMA is still serving as a dynamic resistance. Last week, price of Genting managed to rebound from the RM10 support level, but unfortunately, after the rebound, price of Genting remained resisted by the 14, 21, 31 EMA, and therefore, forming another lower-high, and the short term downtrend remains intact.

As indicated by A, if price of Genting should break below the RM10 support, it would be forming a new-low of 4 months, which fulfilled the characteristic of a downtrend (lower-high and new low). Technical outlook for Genting remains negative for now. And as long as price of Genting is still staying below the 14, 21, 31 EMA, it is a good idea to stay away from this stock.

4 Q Rolling PER	17.42 times	Dividend Yield	0.75%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	7.8 sen	0.75%	14.50%
31/12/2009	7.2 sen	1.14%	11.74%
31/12/2008	7 sen	1.89%	6.27%
31/12/2007	37 sen	0.98%	12.15%
31/12/2006·	32 sen	0.97%	21.66%

Table 2: Genting – 3182, yearly dividend, dividend yield, and net profit ratio.

Axiata – 6888: Technical correction in long term uptrend.

Chart 4: [Axiata – 6888] as at 23/02/2011.

Like most of the blue chips counters, price of Axiata was affected by the sharp correction across the market. However, despite being affected by the correction, the long term uptrend of Axiata is still intact. This is because Axiata weekly chart is still staying above the 14, 21, 31 Weekly EMA long term dynamic support.

In other words, for those investors whom had bought this stock at a lower price, it is a good idea to continue to hold, provided that he or she should lift the trailing stop or profit taking level gradually according to the 14, 21, 31 Weekly EMA. Still, if any one should feel uncomfortable amid the market condition, he or she could choose to take profit partially, by selling 1/3 of the positions.

4 Q Rolling PER	23.57 times	Dividend Yield	2.02%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2010	10 sen	2.02%	11.33%
31/12/2009	0 sen	0.00%	12.61%
31/12/2008	0 sen	0.00%	4.39%

Table 3: Axiata – 6888, yearly dividend, dividend yield, and net profit ratio.

Conclusion:

It is irrational to repeat the same actions with the same mindset, but every time expect a different result. A third person can see clearly that this is a dead-end in a maze, but the we, mouse inside the maze, have no idea. Since when, and who, instill the idea of "buy on dip" or "buy low sell high" into our mindset? And had we ever spent a considerable amount of time and dedication to explore the validity of such idea? We normal people are generally feeling more comfortable by sticking to old ideas, such as buying low, but ask ourselves honestly, didn't every we buy because we somehow believed that it was the lowest price at that moment? And we know the true result to that. It is easy to conceive the needs to change our trading mindset, to follow the direction of the market, not against it. Taking the action to change, on the other hand, takes real courage and honesty to one self.

KLCI, CIMB, MUHIBAH, TENAGA

2011-04-04T11:23:00.005+08:00

Due to profit taking by foreign funds, stock markets in Asia were hit by a rather sharp correction, and the KLCI is no exception. The KLCI was pulled down below the 1500 psychological level briefly, but it managed to stay back above 1500. As shown on chart 1, the KLCI is now forming a downtrend channel, with the T1 line being the dynamic resistance, while the T2 line being the dynamic support.

Chart 1: KLCI as at 16/2/2011.

Technically, as long as the KLCI is still trading within the downtrend channel, the technical outlook is expected to be weak, even if the KLCI could rebound from the 1500. In other words, the KLCI has to break above the T1 line successfully to break away from this negative trend.

Other than the 1500 psychological support, the next support for the KLCI is at 1480. As for whether the KLCI is heading towards a bear market, it is still too soon to call. This is because the KLCI is still supported by the 14, 21, 31 Weekly EMA, which is the long term uptrend dynamic support since March of 2009. Meanwhile, the recent correction of the KLCI had mostly affect some blue chips counters, whereas, other non-blue chips stocks are not much affected. In addition to that, during this correction, only the Asian markets were affected, while the US and European markets are basically still trending up. Therefore, if the KLCI should consolidate above 1500, and the US and European markets are still doing well, the local market sentiment is likely to regain some of this ground.

Below are this week's Case Studies:

CIMB – 1023: Uptrend violated.

Chart 2: CIMB – 1023, as at 16/02/2011.

As shown on chart 2, after breaking below the 14, 21, 31 EMA on the 21st of January, price of CIMB is now still below the 14, 21, 31 EMA, and therefore, the 14, 21, 31 EMA is serving as a dynamic resistance, and the technical outlook is weak.

Meanwhile, other than resisted by the dynamic resistance, price of CIMB also formed a lower-high on the 9th of February, and this is outlined by the T1 downtrend line. Based on the current chart reading, it has formed a short term downtrend. Therefore, there is no ideal entry signal at this moment, and trying to catch a rebound is a risky move. Next support for CIMB is seen at RM 7.80~RM 7.90.

Chart 2A: CIMB – 1023, weekly chart.

Not only that it has formed a short term downtrend, it is also testing the 31 week EMA, which is the long term uptrend dynamic support. As shown on Chart 2A, since entering its uptrend in March of 2009, its price had always been supported by the 14, 21, 31 Weekly EMA, and although there were many correction during this long term uptrend, price of CIMB had never broken below the 31-week EMA. If price should break below this important dynamic support, it suggests that the long term uptrend is violated.

4 Q Rolling PER	11.28 times	Dividend Yield	2.28%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2009	18.5 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%
31/12/2005	15 sen	2.63%	17.51%

Table 1: CIMB – 1023, yearly dividend, dividend yield, and net profit ratio.

Muhibah – 5703: Forming Descending Triangle.

Chart 3: Muhibah – 5703 as at 16/02/2011.

The recent market correction has affected mostly blue chips. As shown on chart 3, price of Muhibah was also affected, and it had a correction too. However, the correction was rather mild, with its price remained supported by the RM1.60~RM1.65 support.

After being supported by the RM 1.60~RM1.65, price of Muhibah gapped up but failed to reach its previous peak of RM1.93. Instead, it started to retreat and formed a lower-high, which is outlined by the L1 line. Together with the RM 1.60~RM 1.65 support and the L1 line, it suggests that Muhibah is forming a Descending Triangle consolidation.

Technically, when price is forming a Descending Triangle, it implies a consolidation with a little bearish bias. This is because although the support remain unchanged, the resistance is actually gradually falling (lower-high). Even if price should extend its sideways consolidation, it would break away the L1 line also, but this does not mean a buy signal, unless price should form a higher-low followed by the break out. On the contrary, if price should break below the RM1.60~RM1.65 support, chances of a bearish reversal would be higher.

4 Q Rolling PER	36.13 times	Dividend Yield	1.49%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2009	2.5 sen	2.72%	0.64%
31/12/2008	2.5 sen	2.53%	1.02%
31/12/2007	4.5 sen	1.20%	4.94%
31/12/2006	7.5 sen	2.88%	3.06%
31/12/2005·	4 sen	5.76%	2.68%

Table 2: Muhibah – 5703, yearly dividend, dividend yield, and net profit ratio.

Revision of Last Week's Case Study: Tenaga - 5347: Technical Rebound in Downtrend.

Chart 4: Tenaga - 5347 as at 16/02/2011.

As shown on chart 4, price of Tenaga rebounded from RM5.94 or rounding up at RM6.00 support. However, it is still below the 14, 21, 31 EMA dynamic resistance, and this suggests that the downtrend is still intact. Readers are advised to study the characteristic of the downtrend, which is lower-high and new low. If price should be resisted by the dynamic resistance again, and started to retreat, it would form another lower-high.

Although there were a few rebound along the downtrend, price of Tenaga failed to break above the dynamic resistance. If one should think that every time price rebound would be the 'lowest' price, then there will be many investors feeling regret in the downtrend.

In short, selling pressure is expected to be stronger in the downtrend, this is because those who tried to catch the bottom, are now losing money, and their intention to 'make money' when they took the position is now over-taken by the new intention, rather subconsciously, which is to 'break even'. To understand this is not difficult, but it is against human nature, which is to buy things cheap when possible. This explains why an untrained person will have urges to buy when price is falling.

4 Q Rolling PER	8.32 times	Dividend Yield	4.23%
Dividend		Dividend Yield	Net Profit Ratio
31/08/2010	26 sen	2.94%	10.56%
31/08/2009	17.77 sen	2.22%	3.19%
31/08/2008	20 sen	2.53%	10.07%
31/08/2007	36.30 sen	3.65%	17.41%
31/08/2006	12.00 sen	1.31%	10.43%

Table 3: Tenaga - 5347, yearly dividend, dividend yield, and net profit ratio.

Conclusion:

Trend following takes more than just the skill to identify uptrend or downtrend, it also takes patience and confidence, which takes years for an individual to master, and sadly, only few make it.

KLCI, MULPHA, KUB, RAMUNIA

2011-04-04T11:14:00.005+08:00

Chart 1: KLCI as at 16/2/2011.

Below are this week's Case Studies:

Mulpha – 3905: Uptrend violated.

Chart 2: Mulpha – 3905 as at 16/02/2011.

As shown on chart 2, price of Mulpha attempted to rebound on the 8th of February, and it managed to return to above the 14, 21, 31 EMA briefly. However, price started falling after that, and breaking below the 14, 21, 31 EMA again, and the 14, 21, 31 EMA is now serving as the dynamic resistance.

Not only that, when price fell below the 14, 21, 31 EMA, it also formed a lower-high, which is outlined by the T1 line. As indicated by A, if price should break below its recent support of RM 0.555, it would be making a new low.

It is important that one should remember the characteristic of a downtrend, which is the formation of lower-high and new low. In other words, if price of Mulpha should remain below the 14, 21, 31 EMA or the T1 line, the technical outlook is expected to be weak. And it is not a good idea to buy at this moment. As for those whom already had position, it was a signal to take profit or the cut loss when price fell below the 14, 21, 31 EMA. Nevertheless, next support for Mulpha is seen at RM 0.52 followed by RM0.48.

4 Q Rolling PER	6.16 times	Dividend Yield	0.00%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2009	0 sen	0.00%	-1.45%
31/12/2008	0 sen	0.00%	-8.24%
31/12/2007	0 sen	0.00%	12.22%
31/12/2006	0 sen	0.00%	6.75%
31/12/2005	0 sen	0.00%	27.33%

Table 1: Mulpha – 3905, yearly dividend, dividend yield, and net profit ratio.

Revision of last week's case study: KUB – 6874: Forming Symmetrical Triangle.

Chart 3: KUB – 6874 as at 16/02/2011.

As shown on chart 3, price of KUB successful rebound from the 14, 21, 31 EMA on the 9th of February, and therefore, the uptrend is still intact, and the 14, 21, 31 EMA is still serving as the dynamic support. In other words, for those whom are already in position, it is a good idea to hold, provided that you should gradually lift your cut loss or profit taking level accordingly to the 14, 21, 31 EMA.

Although price rebounded from the dynamic support, it failed to return nor break above its peak of RM0.95; instead, it started to retreat at RM0.90, forming a lower-high, which marked by the L2 line. This is a sign suggesting a possible weakening movement for KUB. By combining the 14, 21, 31 EMA (or L1) and the L2 line, KUB is actually forming a Symmetrical Triangle consolidation.

For those whom are already in position, the Symmetrical Triangle will not affect much, as the trailing stop method still applies. However, it is not a good idea to take up new position when price is forming a Symmetrical Triangle, for the Symmetrical triangle means that the direction of price is unclear. It is usually better to wait for a valid break out above the L2 line while still supporting by the 14, 21, 31 EMA, then one could only consider taking up a new position. On the contrary, if price should break below the L1 line or the 14, 21, 31 EMA, it is a signal suggesting to take profit.

4 Q Rolling PER	14.26 times	Dividend Yield	0.00%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2009	0 sen	0.00%	5.62%
31/12/2008	0 sen	0.00%	3.92%
31/12/2007	0 sen	0.00%	-14.43%
31/12/2006	0 sen	0.00%	-1.08%
31/12/2005·	0 sen	0.00%	-4.77%

Table 2: KUB – 6874, yearly dividend, dividend yield, and net profit ratio.

Ramunia - 7206: Uptrend remains intact.

Chart 4: Ramunia - 7206 as at 16/02/2011.

The recent correction has affected mostly blue chips, for stocks like Ramunia, as shown on chart 4, the uptrend remains intact, despite a mild correction after hitting RM0.75. As indicated by A, price of Ramunia is still supported by the 14, 21, 31 EMA, and this suggests that the uptrend is not violated. Technically, if investors could gradually lift the cut-loss or profit taking level according to the 14, 21, 31 EMA, he or she would gradually reduce the trading risk when price should continue supported by the 14, 21, 31EMA.

If price should rebound from the 14, 21, 31 EMA, it would form another higher-low, which could be seen as a buy signal. However, one should consider another factor, which is the overall market condition. If the KLCI should stay below the T1 downtrend, chances are the general market sentiment as a whole will be affected, and the probability of Ramunia to continue its uptrend will also be affected.

Nevertheless, immediate resistance for Ramunia is at RM0.75. If price should form a higher-Low, then the next target would be to break above the RM0.75, in order for the uptrend to continue. Please note that Ramunia is a PN-17 counter.

4 Q Rolling PER	6.54 times	Dividend Yield	0.00%
Dividend		Dividend Yield	Net Profit Ratio
31/10/2010	0 sen	0.00%	195.00%
31/10/2009	0 sen	0.00%	-15.48%
31/10/2008	0 sen	0.00%	-77.48%
31/10/2007	0 sen	0.00%	3.37%
31/10/2006	0 sen	0.00%	5.02%

Table 3: Ramunia - 7206, yearly dividend, dividend yield, and net profit ratio.

Conclusion:

Nevertheless, for those investors whom are already in position, and their stocks are still trending up, it is a good idea to continue to hold, as long as the trailing stop trading plan is still in place. As for those counters that are affected by this correction, and if price should break below the trailing stop reference, the right thing to do is to cut loss.

KLCI, AMMB, Pchem, Tenaga

2011-04-04T11:07:00.005+08:00

The KLCI rebounded precisely at 1500 psychological support before the Chinese New Year holiday. However, it failed to return to its previous peak of 1577, but instead, if formed a lower-high at around 1540, and this is shown as the T1 downtrend line. As indicated by A of Chart 1, if the KLCI should start falling after being resisted by the T1 line, the KLCI would have a risk of forming a short term downtrend and the technical outlook for the KLCI would be on the negative side.

Chart 1: KLCI reversal characteristic.

Although the KLCI is showing some weakness with the possible lower-high formation, it is still too soon to call for a bear run for the KLCI remains above 1500. If the KLCI should stay above 1500, it would not be forming a downtrend. This is because when the KLCI or the market should fall but stay above 1500, it would only affect those investors who had entered their positions in the past 1 month, and if the KLCI should prolong its consolidation above 1500, the selling pressure or the negative memory of these losers will be neutralized by new inflow of fresh capital, big of small. Don't forget, those who had bought earlier or at a lower level, are basically unaffected yet, thus the selling pressure is not likely to be too strong.

However, the above explanation is only based on a theory. In reality, one should always be prepared for the worst. If the KLCI should continue to retreat and break below 1480~1500, it means that not only investors who bought in the last month are affected, those who had entered for the last 4 months, and even those whom are already in profit will be affected too, and if these investors start selling, one could only expect more selling pressure, and the KLCI or the market could go down further. This is why, when analyzing the market, one should not only analysis his own position, he has to understand others positions and memory of the losers as well, to better understand the market behavior.

AMMB – 1015: Short term downtrend.

Chart 2: AMMB – 1015 as at 9/02/2011.

As shown on Chart 2, price of AMMB broke below the 14, 21, 31 EMA dynamic support, since its retreat on the 21 of January. Currently, it is in a short term downtrend, and the 14, 21, 31 EMA is serving as the dynamic resistance. Technically, provided that the price is still below the 14, 21, 31 EMA, the technical outlook for AMMB is on the negative side.

Support for AMMB is at RM6.00. Although price of AMMB is near its RM 6.00 support, it is still a bad idea to try to catch any rebound. Catching a rebound in a short term play is highly risky. Further more, there are no ideal buy signal at the moment.

As for those whom had bought earlier at a lower price, it is a good idea to monitor the weekly chart of AMMB, which reflects the long term movement of this stock. Generally, the weekly chart is reliable for stocks that are less volatile, particularly some blue chip counters.

As shown by Chart 2A, price of AMMB is now testing the 14, 21, 31 weekly EMA. It is notable that since March of 2009, AMMB entered a bull trend, and since then, its price has been supported by this weekly EMA. If price of AMMB could rebound from this long term dynamic support, it means that the long term uptrend is still intact, and those investors who had positions and would like to hold for long term could continue to hold. As for those who are not comfortable with the current market condition, he or she could choose to partially take profit by selling 1/3 of the positions.

Chart 2A: AMMB – 1015 weekly chart.

4 Q Rolling PER	16.39 times	Dividend Yield	1.59%
Dividend		Dividend Yield	Net Profit Ratio
31/03/2010	10.50 sen	2.10%	14.77%
31/03/2009	8.00 sen	3.07%	14.69%
31/03/2008	6.00 sen	1.74%	11.13%
31/03/2007	5.00 sen	1.33%	-3.38%
31/03/2006	5.00 sen	1.77%	7.34%

Table 1: AMMB - 1015, yearly dividend, dividend yield, and net profit ratio.

PCHEM - 5183: Uptrend being resisted.

Chart 3: PCHEM - 5183 as at 9/02/2011.

As shown on Chart 3, price of Pchem is being resisted by the RM6.30~RM6.40, and price of Pchem retreated since then. However, it is still above the 14, 21, 31 EMA, which is the dynamic support, and this suggests that the uptrend is still intact.

Whenever price retreat from a resistance, or purely having a technical correction, we will have to watch out for the rebound on the dynamic support. When price could rebound from the dynamic support, then only it will form a higher-low, and later possibly break new high. If price should break below the dynamic support after its correction, it will affect the uptrend, and usually suggests a sell signal.

However, the sell signal varies from individual. For those who had just entered a position, it is a critical sell signal. As for those who had bought earlier and at a lower price, they could choose to allow a wider margin of correction, or choose to take profit partially.

Nevertheless, current support for Pchem is at 14, 21, 31 EMA as well as RM6.00. Next support is at RM 5.80, while the resistance is at RM 6.40.

Tenaga – 5347: Downtrend remains intact.

Chart 4: Tenaga – 5347 as at 9/02/2011.

Despite the KLCI and many other blue chips counters were mostly rising in the past months, price of Tenaga was heading south. As shown on chart 4, price of Tenaga has been resisted by the falling 14, 21, 31 EMA dynamic resistance. Although there were many rebound, the rebound failed to return to the previous peak. Rather, they formed a lower-high below the 14, 21, 31 EMA, and later break new low. This has illustrated the complete characteristic of a typical downtrend.

As for investors whom are inexperienced, they might find the stock price being attractive, and started buying. Only to find out later that the stock price could go even lower. Look at chart 4 carefully, and can you tell your self, how many investors had bought this stock thinking that the stock price is cheap, and now feeling regretted? Therefore, a trained individual would only take a position when the stock price is showing a sign of an uptrend formation, which is higher low.

Support for Tenaga is at RM 6.00 ~ RM 6.10. If price should break below this level, it means that all investors who had bought earlier are making losses, therefore, it will trigger more selling pressure as more investors are feeling regretted.

4 Q Rolling PER	8.35 times	Dividend Yield	4.21%
Dividend		Dividend Yield	Net Profit Ratio
31/08/2010	26 sen	2.94%	10.56%
31/08/2009	17.77 sen	2.22%	3.19%
31/08/2008	20 sen	2.53%	10.07%
31/08/2007	36.30 sen	3.65%	17.41%
31/08/2006	12.00 sen	1.31%	10.43%

Table 2: Tenaga – 5347, yearly dividend, dividend yield, and net profit ratio.

Conclusion:
Regardless of the condition of the broad market, individual investors must honor their own trading plan, and to equipped with the skill to identify stock price movement. Common sense of buy low sell high is only good when the market is bullish. As a rule of thumb, when therefore is higher-low, there is no buy signal.

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KLCI, Genting, KUB, KLK

2011-04-04T10:54:00.006+08:00

Chart 1: KLCI reversal characteristic.

Genting – 3182: Short term downtrend.

Chart 2: Genting – 3182 as at 09/02/2011.

As indicated by A on Chart 2, price of Genting ended lower as investors are taking profit, and the sellers are still dominant. Price of Genting broke below the 14, 21, 31 EMA dynamic support, and the technical outlook is now on the negative side. Trying to catch a rebound would be very riskly.

Technically, if price of Genting should stay below the 14, 21, 31 EMA, the technical outlook shall remain weak. If this short term downtrend shall persist, more investors will be affected, and the selling pressure will increase. Current support of Genting is at RM9.50 ~ RM 10.00. If price should break below this support, more downside movement is expected.

As for those whom are already in position much earlier at a lower price, it is crucial to monitor the long term weekly chart. As shown on Chart 2A, price of Genting is now testing the 14, 21, 31 Weekly EMA, and if price should break below this long term dynamic support, the long term uptrend would be affected, and investors are advised to take profit or to cut loss.

Chart 2A: Genting – 3182, weekly chart.

4 Q Rolling PER	20.02 times	Dividend Yield	0.67%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2009	7.2 sen	1.14%	11.74%
31/12/2008	7 sen	1.89%	6.27%
31/12/2007	37 sen	0.98%	12.15%
31/12/2006	32 sen	0.97%	21.65%
31/12/2005	29 sen	1.36%	22.86%

Table 1: Genting – 3182, yearly dividend, dividend yield, and net profit ratio.

KUB – 6874: Rebounding from the uptrend dynamic support.

Chart 3: KUB – 687 as at 9/02/2011.

During the recent correction of the KLCI, counters affected most are heavy weighted blue chips. As for non-blue chip counters, they are less affected, and some even remain in their uptrend. As shown on chart 3, price of KUB had a technical correction last two weeks, but price remains above the 14, 21, 31 EMA dynamic support, and this suggests that the uptrend is still intact.

As indicated by A, price of KUB rebounded from the 14, 21, 31 EMA, and price could re-test its peak of RM0.95. Technically, if price should stay above the 14, 21, 31 EMA, it is a good idea to hold, as long as investors could lift the cut loss level according to the 14, 21, 31 EMA, and this way, they could gradually reduce the trading risk. As for investors who are not feeling comfortable, an alternative options is to selling 1/3 of the position, while apply a trailing stop method for the remaining.

4 Q Rolling PER	13.27 times	Dividend Yield	0.00%
Dividend		Dividend Yield	Net Profit Ratio
31/12/2009	0 sen	0.00%	5.62%
31/12/2008	0 sen	0.00%	3.92%
31/12/2007	0 sen	0.00%	-14.43%
31/12/2006	0 sen	0.00%	-1.08%
31/12/2005·	0 sen	0.00%	-4.77%

Table 2: KUB – 6874, yearly dividend, dividend yield, and net profit ratio.

KLK - 2445: Long term uptrend, but temporary capped by a resistance.

Chart 4:KLK - 2445 as at 19/01/2011.

As shown on chart 4, price of KLK has been testing the RM 23 resistance a few times in 1 and a half month, but it is still being resisted by the RM23 level. Therefore, the uptrend is temporary capped, and the upside room is now limited. As indicated by A, price of KLK started to retreat after hitting its resistance at RM22.90, but it has not formed a downtrend, because it has not shown any signs of a lower-high formation.

If price of KLK should continue to retreat, then we shall watch out for the support at RM 20. If price should rebound from RM20 support, it would most likely be forming a trading range, and KLK could prolong its consolidation, without forming a downtrend.

As for investors whom had already entered their positions earlier at a lower level, it is important to monitor the long term weekly chart of KLK. As shown on chart 4A, the long term 14, 21, 31 weekly EMA is still serving as a healthy uptrend dynamic support for KLK, despite the recent consolidation. This suggests that the long term movement of KLK is still healthy, and therefore, long term investors could choose to hold.

Chart 4A: KLK - 2445 weekly chart.

4 Q Rolling PER	23.73 times	Dividend Yield	2.66%
Dividend		Dividend Yield	Net Profit Ratio
30/09/2010	60 sen	3.00%	13.51%
30/09/2009	40 sen	2.90%	9.2%
30/09/2008	70 sen	7.29%	13.25%
30/09/2007	50 sen	3.79%	13.70%
30/09/2006	50 sen	4.59%	11.06%

Table 3: KLK - 2445, yearly dividend, dividend yield, and net profit ratio.

Conclusion:

The KLCI must stay above 1480~1500, or else, more the market sentiment would be further dampen by more selling pressure. As for individual investors, a prudent trading plan is always needed when following a trend. As for now, trying to catch a rebound would be a risky move.

KLCI,DIALOG,KENCANA

2011-04-04T10:45:00.007+08:00

The KLCI started falling as a technical correction after being resisted by the 1576.95, and as at 26/1/2011, the KLCI has fallen 70 points or 4.5%, and this is the sharpest correction since June 2010. As profit taking activities still dominant over blue-chip counters, many individual counters also suffered from the market sell down. What should we look for in the coming weeks, and this week, we have specially fabricated 3 scenarios for the KLCI movement, so that readers could better prepared for the possible outcome.

Chart 1: KLCI chart as at 26/01/2011.

As shown on chart 1, the FBM KLCI fell below the T1 uptrend line, as profit taking pushes the KLCI lower. Therefore, the mid term uptrend has been violated. However, it does not mean that the KLCI would immediately reverse to a downtrend movement. Actually, up to now, the KLCI has not shown any sign of a downtrend formation. Meanwhile, as indicated by A, the KLCI on Wednesday, had falling sharply in the morning, but it gradually recovered most of its early losses (-21.07 points), to close with a long lower shadow line. This is an early sign suggesting that the KLCI is supported by the 1500 psychological support level.

Scenario 1: KLCI fall below the 1500 mark, and down trend begins.

Chart 2: KLCI forms lower-high, breaking below 1480~1500.

As shown on chart 2, if the KLCI should form a downtrend, the first important characteristic would be a lower-high formation. In other words, the KLCI would first rebound, but it would not return to its previous peak, but rather starting to reverse at a lower peak. As the KLCI starts to fall again after the rebound, the next level to watch out for is the 1480~1500 support. If the KLCI should break below this level, it would be a new low, by then, the risk of a downtrend would be higher.

Based on the behavior of the KLCI movement, the time required for the KLCI to form a lower-high, (starting from the beginning of its correction from 1576), until it breaks below 1480~1500 level, should be around 1 month to 2 months. Theoretically, the smaller the correction, the shorter time required to form a downtrend reversal. In the beginning of the 2008 downtrend, the KLCI took 33 trading days to form the reversal, which is 1 and a half months time. Not only that, almost every downtrend of the KLCI has lower-highs formation, and especially the one in 2008, where the lower-high formation was typically obvious. (Study Chart 2B)

Chart 2B: The beginning of a downtrend of KLCI in 2008.

Scenario 2: KLCI forming Triangle Consolidation.

Chart 3: KLCI forming a triangular consolidation pattern.

The purpose of this week's article is to point out that once the KLCI break below the T1 uptrend line, it might not be forming a downtrend right away. In fact, there is a good chance that the KLCI would prolong its consolidation by forming a Triangle pattern, of sort. Technically, the characteristics of the KLCI formation a Triangle would be a rebound from above 1500, then reaching a peak lower than the 1576 level, and retreat again, but the second time when it retreat, the falling should be less severe, as the fluctuation of the KLCI would be getting smaller. This will result in the KLCI forming both the higher-low as well as lower-high. (Refer to Chart 3).

In case you haven't know, there are two advantages if the KLCI should form a Triangular consolidation pattern. First, when the market is consolidating, the new inflow of capital will off-set most of the selling pressure, especially for blue chips. However, as the fluctuation of the KLCI is generally low, the new investors would not suffer huge losses, thus it is less likely to trigger huge selling. At the same time, it gives more time for the undecided traders to make up their mind, whether to continue hold, or to close position.

Secondly, after the market consolidate, it is likely that the KLCI would have avoided its risk of a downtrend formation. Particularly, if by the time the consolidation is over (in which selling pressure are neutralized by new inflow of capital), and if the regional markets were still doing well, the KLCI would have a better position in resuming its uptrend movement. Generally, the time required for the KLCI to consolidate could take as long as 3 months. Please refer to chart 3B.

Chart 3B: KLCI triangular consolidation patterns during the bull run since 2009.

Scenario 3: KLCI breaks new high after a consolidation.

Chart 4: KLCI forms higher-low, and break above 1577, making new high.

Other than the two scenarios mentioned earlier, the KLCI could also form higher-low and later break above 1577. However, this would not be easy for the KLCI, as it needs more new inflow of fresh capital to absorb the selling pressure.

Therefore, we shall take a closer look in this progress. First, the KLCI has to break above and return to above the 14, 21, 31 EMA, and we shall expect many pullback after the KLCI should break above the 14, 21, 31 EMA, especially when the KLCI is approaching 1577. Whether the KLCI could break above the 1577 or not, the KLCI has to stay above the 14, 21, 31 EMA successfully first, and then followed by the increased of market volume, plus the regional markets are still doing well, then only the KLCI would have a chance to break above 1577. As for the timing for this break out, it is generally harder to predict.

By understanding the above mentioned 3 scenarios, investors are well-prepared to any one of the out come. Basically, the above scenarios could apply to individual stocks too, but the behavior of individual stock varies, and therefore, investors are required to analyze their stock with maturity and a considerable flexibility.

This week's Case Studies：

Dialog – 7277: Remains supported by the dynamic support.

Chart 5: Dialog – 7277 as at 26/1/2011.

As indicate by A, despite the market correction, price of Dialog remains above the 14, 21, 31 EMA dynamic support, and this suggests that its uptrend has not been violated. Therefore, for those whom are already in position, you could choose to hold. As long as you follow the trailing stop theory, by lifting your cut loss level gradually higher according to the 14, 21, 31 EMA. As for those whom are interested in taking up a new position, a general rule, is to wait for the formation of higher-low. However, even if price should rebound from the 31-day EMA, we will have to watch out for any lower-high formation, for it would be an early sign of a possible reversal.

Kencana:

Chart 6: Kencana – 5122 as at 26/1/2011.　

As shown in Chart 6, the arrow A indicates that price of Kencana has fallen below the 14, 21, 31 EMA since its correction started from the RM2.96 peak. This suggests that the uptrend is temporary violated, and those whom had follow the trailing stop method would have to take profit or cut loss. If price should rebound and return to above the 14, 21, 31 EMA, investors are advised to watch out for any lower-high formation, which would be an early sign of a reversal pattern.

Conclusion:

We should always be aware that the market could reverse any time, so as the individual stocks. However, this does not mean that when the market reverse and we would have no protection against it. Provided one could carefully identify the reversal pattern and honor his or her own trading plan, he or she would have prepared for this unpredicted event. Of course, a little loss is inevitable, but for the long run, those who are well-prepared and honest to him or herself, will profit from the market.