(Chart A) A bullish scenario for the KLCI.
(Chart B) FBMKLCI Last week's movement.
From chart A and B, we can see that the KLCI has resumed its uptrend just like Scenario A has indicated. Notice that the Bollinger Bands and the MACD signals are almost identical between the real KLCI movement (Chart B) and the simulated (Chart A); and that is why investors have to be aware of the behavior of price trend for the KLCI as well as individual, for the similar analysis approach can be applied on individual stocks as well. This week, let us look at a few more examples of how to catch these signals.
IRCB
(Chart 1) IRCB , chart from 16/07/2009 to 11/11/2009.
As indicated by A, the Bollinger Bands of IRCB contracted for about 1 week, and price are consolidating, while preparing for a new movement. And the direction of a new movement shall only be revealed once the Bollinger Bands re-expands.
Although the Bollinger Bands has not expanding, the MACD histogram is actually rising gradually, forming a Rounding bottom, showing some signs of improvement. However, this has to be confirmed with the re-expansion of the Bollinger Bands.
If the Bollinger Bands should re-expand with price of IRCB above the Bollinger Middle Band, it would be a bullish signal. Then, the Bollinger Middle Band shall serve as the dynamic support for the bullish movement as well as the trailing stop reference. Technically speaking, the bullish signal is best to confirm with the increase of volume, as circled at C. Support for IRCB is found at RM0.55 while the Resistance are at RM0.85 and RM0.97 level.
Financial Summary As at 31/7/2009.
| 4 Q Rolling PER） | 36.92 times | Dividend Yield | 0.00% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/01/2009 | 0 sen | 0.00% | -3.83% |
| 31/01/2008 | 0 sen | 0.00% | -16.09% |
| 31/01/2007 | 0 sen | 0.00% | -5.36% |
| 31/01/2006 | 0 sen | 0.00% | 0.15% |
| 31/01/2005 | 1.5 sen | 3.49% | 11.49% |
Table 1: IRCB Financial Summary.
Muhibah
(Chart 2) Muhibah, chart from 16/07/2009 to 11/11/2009.
As shown on chart 2, price of Muhibah was trending down since July, but it rebounded after touching RM 1.12 level. Despite the rebound, it has not broken away from the bearish biased movement and consolidated since then. And the contraction of the Bollinger Bands confirm the consolidation signal.
As indicated by A, the Bollinger Bands is now narrowing suggesting that the consolidation is coming to an end, and a new movement is about to begin. Of course, we have to see the re-expansion of the Bollinger Bands to be able to confirm the beginning of a new movement.
As circled at B, the MACD is forming a Rounding Bottom, suggesting that the short term movement has been improving gradually. This is usually an early positive signal, and investors could be prepared for the expansion of the Bollinger Bands.
If the Bollinger Bands should expands with the price of Muhibah above the Bollinger Middle Band, it would be a bullish signal and Bollinger Middle Band shall serve as the dynamic support as well as the trailing stop reference. If the bullish Bollinger Bands signal could confirmed with the increased of volume (as indicated by C), it is likely to give strength to the signal. Resistance for Muhibah is at RM 1.25 followed by RM 1.33 level.
In contrary, if the Bollinger Bands should re-expand with the price of Muhibah below the Bollinger Middle Band, it would be a bearish biased signal. If price should break below the RM 1.12 support, it would be making a new low, thus investors should consider cutting loss.
Financial Summary as at 30/6/200:
| 4 Q Rolling PER） | 44.15 times | Dividend Yield | 2.14% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2008 | 2.5 sen | 3.03% | 1.02% |
| 31/12/2007 | 4.5 sen | 1.50% | 4.94% |
| 31/12/2006 | 7.5 sen | 2.82% | 3.06% |
| 31/12/2005 | 4.0 sen | 5.63% | 2.68% |
| 31/12/2004 | 3.0 sen | 3.39% | 0.79% |
Table 2: Financial Summary of Muhibah.
Gamuda
(Chart 3): Gamuda, chart from 16/07/2009 to 11/11/2009.
As indicated by A, the contracted, as the price of Gamuda stopped falling and went into a consolidation; but price of Gamuda remains below the Bollinger Middle Band. This suggests that despite the consolidation, the immediate outlook for Gamuda remains bearish biased. If the Bollinger Bands should expands with price breaking above the Bollinger Middle Band, there is a chance that Gamuda might pickup some strength.
As circled at B, the MACD histogram also formed a Rounding Bottom. This is a signal suggesting that the price has stopped falling, and a signal of some improvement, or even a chance to regain some strength. If the MACD histogram could continue rising and break above the zero level. The improvement is likely to carry on. Nonetheless, the MACD histogram is a Secondary indicator, and its signal has to be confirmed with the Bollinger Bands signal.
If the Bollinger Bands should re-expand, with price above the Bollinger Middle Band, there is a chance of a reversal for Gamuda, and the next resistance is at RM 3.30 level. Technically speaking, if volume should also increase, it would strengthen the bullish signal of the Bollinger Bands, and the Bollinger Middle Band shall serve as the dynamic support as well as the trailing stop reference. (Study C)
On the other hand, if the Bollinger Bands should expand with price below the Bollinger Middle Band, it would be a bearish biased signal for Gamuda, suggesting price might continue its downtrend. If price should break below the RM3.00 support, it would be a new low, thus investors should consider cut loss.
Financial Summary as at 31/7/2009:
| 4 Q Rolling PER） | 32.12 times | Dividend Yield | 2.58% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/07/2009 | 8 sen | 2.48% | 7.10% |
| 31/07/2008 | 25 sen | 10.92% | 13.52% |
| 31/07/2007 | 46 sen | 5.90% | 12.23% |
| 31/07/2006 | 16 sen | 4.57% | 13.74% |
| 31/07/2005 | 16 sen | 3.48% | 17.26% |
Table 3: Financial Summary of Gamuda.
Conclusion:
Last week, the KLCI reacted similarly as the bullish scenario mentioned earlier, and the same approach of analysis can be applied to individual stocks. In short, understanding the reversal pattern can help investors in preparing and planing for their trading plan.
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