Case Studies:
KNM - Breakout away from Downtrend.
Chart1:KNM – 7164, from 8/5/2009 to 24/09/2009.
As indicated by A, price of KNM breaks above the T1 downtrend line on the 16thof September, and also breaking above the 14, 21, 31 EMA, dynamic resistance. This shows that KNM is now away from the T1 downtrend, but it has not yet formed an valid uptrend.
As indicated by B, when price of KNM breaks above the T1 line, volume increased significantly, suggesting some increased of buying interests. As indicated by C, after rising for a few days, price of KNM started to retreat as profit taking activities begun, due to the festive holiday. However, as indicated by D, volume decreased significantly as price retreat, this suggests that the selling pressure was not strong, thus a healthy correction.
The first characteristic of forming an uptrend is the formation of a Higher-low, and therefore, if price of KNM should rebound from the 14, 21, 31 EMA, and form a Higher-low, there is a chance that KNM is forming an uptrend. If volume should increased substantially when it forms a Higher-Low, it would be a stronger signal, and investors could take it as a buy signal, and the first cut-loss point is at RM 0.69 level.
If price should continue rising after forming a higher low, the 14, 21, 31 EMA can serve as the dynamic support as well as the trailing stop reference for the uptrend. In other words, as long as the price of KNM could maintain above the 14, 21, 31 EMA, investors can keep their shares until price break below the 14, 21, 31 EMA. The immediate resistance for KNM is seen at RM0.80 level, followed by the RM 0.90 level. A strong resistance is seen at RM 1.09.
Major Shareholders:
1 INTER MERGER SB 479,636,322 Shares（12.15% ）
2 CIMSEC NOMS SB CIMB BANK BHD - INTER MERGER SB 368,053,400 Shares（9.33% ）
3 EMPLOYEES PROVIDENT FUND BOARD 273,791,104 Shares（6.94% ）
4 CARTABAN NOMS SB SSBT FUND HG22 - SMALLCAP WORLD FUND INC. 231,151,000 Shares （5.86% ）
5 HSBC NOMS SB EXE.AN-JPMORGAN CHASE BANK NAT.ASS. 146,106,375 Shares（3.70% ）
Latest Financial Highlight as at 30/6/2009：
| PER | 8.35 times | Dividend Yield | 1.95% |
| Dividend | Dividend Yield | Net ProRatio | |
| 31/ 12/ 2008 | 1.5 sen | 3.75% | 13.30% |
| 31/ 12/ 2007 | 4.0 sen | 0.63% | 15.31% |
| 31/ 12/ 2006 | 5.0 sen | 0.55% | 14.56% |
| 31/ 12/ 2005 | 5.0 sen | 1.36% | 11.97% |
| 31/ 12/ 2004 | 3.0 sen | 1.05% | 8.41% |
Table 1: KNM Financial Highlights.
As shown on Table 1, KNM is making consistent profit, but it is not considered a high dividend stock. Therefore, this is generally more suitable for trend / position trading for short and mid term. However, if the broad market condition is favorable, investors could choose to trade long term, but not keeping this stock for dividend income if the market trend turns weak.
UEMLand – Waiting to break away from its consolidation.
Chart 2: UEMLAND 5148, chart from 2/06/2009 to 24/09/2009.
As indicated by A, UEMLand Bollinger Bands contracted, suggesting that the price of UEMland is consolidation, while also preparing for a new movement. Generally, it is the best time to apply the Bollinger Bands when price is consolidating in a sideways manner. It is because, the more the Bollinger Bands is contracting, the clearer the expansion signal.
When the Bollinger Bands Width re-expands, it suggests that the consolidation is over, thus a beginning of a new movement, and the direction of the new movement shall be determined by the relative position of price above or below the Bollinger Middle Band.
If the Bollinger Bands Width re-expands with price above the Bollinger Middle Band, it would be a bullish biased signal, and this signal has to be confirmed with a significant increased of volume. Thus a buy signal, and the first cut-loss point is usually the Bollinger Middle Band. If price should form an uptrend after the bullish Bollinger Bands signal, investors could switch to the 14, 21, 31 EMA as the uptrend trailing stop reference.
In the contrary, if the Bollinger Bands should expands with price below the Bollinger Middle Band, it would be a bearish biased signal. Currently, support for UEMLand is seen at RM 1.55 level, while the resistance is at RM 1.75 followed by a stronger resistance at RM 2.00 level.
Major Shareholders:
1 UEM GROUP BHD 1,873,053,712 Shares（77.14% ）
2 HSBC NOMS SB EXEMPT AN - MORGAN STANLEY & CO.INCORP 121,071,075 Shares（4.99% ）
3 EMPLOYEES PROVIDENT FUND BOARD 98,814,463 Shares（4.07% ）
4 CITIGROUP NOMS SB EXEMPT AN - MELLON BANK 12,679,693 Shares（0.52% ）
5 ALLIANCEGROUP NOMS SB PHEIM ASSET MGMT SB - EPF 8,549,250 Shares（0.35% ）
Latest Financial Highlight as at 30/6/2009：
| PER | 213.33Times | Dividend Yield | 0% |
| Dividend | Dividend Yield | Net ProRatio | |
| 31/12/2008 | 0 sen | 0% | 14.50% |
Table 2: Financial Highlights of UEMLand.
As shown on table 2, UEMLand has a PE (Price Earning Ratio) over 200 times, this suggests that the current price of UEMland is relatively high to its earning power. Meanwhile, due to insufficient track record, we can not judge whether it is suitable for long term holding, for it has never paid a dividend so far. Therefore, for the moment, a more suitable strategy is “Trading Play” for this counter.
Cutting Losses:
While determining buy signal is generally not too difficult for most investor, cutting loss is, on the hand, a tough decision to make. Especially for beginner traders, the idea to cut loss is hard to bare, and whenever there is a risk of cut loss in their trading plan, they wish to give up the trade. In fact, investor will only have to take their “Maximem Risk”, which is the difference between the latest support (cut-loss point) and their entry price, and it is generally below 10%. In other words, investors only have to honor their trading plan, as planned, and whenever the price is moving in their favorable direction, the risk will be reduced.
Conclusion:
In short, investors have to be flexible in analysis, by choosing the suitable indicator in difference market condition. When price is forming a Higher-low, the Exponential Moving Average is generally a good indicator to be an uptrend support as well as the trailing stop reference. This way, investor will be able to gradually reduce their trading risk, and at the same time, avoid taking profit too early. When price is moving sideways, the Bollinger Bands is usually a better indicator to monitor the potential break out from the consolidation. When the Bollinger Bands re-expands, after a contraction, it would be a signal suggesting a beginning of a new movement after a consolidation.
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