Revision of Last Week's Case Study: SPSETIA – 8664: Breaking above RM5.30 resistance.
Chart 1: SPSETIA – 8664 as at 08/12/2010.
As shown on chart 1, price of Spsetia has been consolidating recently, and tested the RM 5.30 resistance level many times. Meanwhile, as price was testing the resistance, it was also supported by the 14, 21, 31 EMA dynamic support, which was rising gradually. This suggests that Spsetia is still on an uptrend, but only with limited upside room.
As indicated by A, price of Spsetia broke above the RM5.30 resistance, and this suggests that it is breaking away from its consolidation and continue its uptrend. Therefore, for those who are already in position, it is a good idea to hold as long as the price if still supported by the 14, 21, 31 EMA.
In other words, investors could gradually lift the cutloss or profit taking point according to the 14, 21, 31 EMA, and this not only limit the downside risk, and at the same time, try to maximize the potential of the uptrend.
| 4 Q Rolling PER | 23.33 times | Dividend Yield | 2.61% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/10/2009 | 14 sen | 3.62% | 12.16% |
| 31/10/2008 | 17 sen | 6.12% | 16.07% |
| 31/10/2007 | 18.4 sen | 2.36% | 22.54% |
| 31/10/2006 | 22.5 sen | 5.74% | 20.81% |
| 31/10/2005 | 25 sen | 6.79% | 16.11% |
Table 1: SPSETIA – 8664, yearly dividend, dividend yield, and net profit ratio.
Mudajaya – 5085: New low.
Chart 2: Mudajaya – 5085 as at 08/12/2010.
As shown on chart 2, price of Mudajaya is trending down in the few months, and at the same time, the 14, 21, 31 EMA is also serving as the dynamic resistance. Technically, with price falling below the 14, 21, 31 EMA, the technical outlook is expected to stay weak, and it is a risky move to try to catch any rebound in the downtrend.
Although price of Mudajaya rebounded at RM3.94, it has failed to break above the 14, 21, 31 EMA, and in fact, after being resisted by the 14, 21, 31 EMA, it started falling again and even breaking below the RM3.94, making a new low.
(Study A)When a stock price is making new low, it seems like it is at the 'cheapest' price, and therefore, many untrained investors think that it is the lowest price and starts buying. However, after they had bought, they only realize that it is not the lowest at all, and price could go down even lower. In fact, they had missed out that making new-low is one of the important characteristics of a downtrend.
In other words, when a stock is trending down, its losing days will naturally out numbered its winning days, and therefore, it is much easier to buy at a lower price. Nevertheless, next support for Mudajaya is seen at RM3.32 and the resistance is at 14, 21, 31 EMA dynamic resistance.
| 4 Q Rolling PER | 7.98 times | Dividend Yield | 0.94% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2009 | 3.6 sen | 0.73% | 16.24% |
| 31/12/2008 | 4.5 sen | 3.98% | 10.68% |
| 31/12/2007 | 8 sen | 2.03% | 11.00% |
| 31/12/2006 | 7 sen | 4.93% | 5.68% |
| 31/12/2005 | 6 sen | 5.31% | 4.20% |
Table 2: Mudajaya – 5085, yearly dividend, dividend yield, and net profit ratio.
Kossan – 7153: Forming Symmetrical Triangle.
Chart 3: Kossan – 7153 as at 08/12/2010.
As shown on chart 3, since falling below RM4.00 as well as the 14, 21, 31 EMA in July, price of Kossan has been trending down, and had its recent low at RM2.95. Fortunately, it rebounded and break away from its downtrend. However, after breaking above its downtrend, it does not mean that it will form an uptrend right away. In fact, most of the time, price would prolong their consolidation after breaking away from their downtrend, and in this case, it formed a Symmetrical Triangle.
L1 line is the dynamic resistance line and it is outlining the lower-highs, which shows a weakness of this stock. At the same time, L2 is the dynamic support, which outlines the higher-lows, and this shows the improvement of the stock movement. As a result, L1 and L2 line are conflicting each other, thus the price fluctuating within this two line and resulted in a decline of volatility.
Technically, it is a good idea to wait and see during a Symmetrical Triangle formation, until a valid break out above the L1 line, then it suggests a positive signal. Of course, the positive signal has to be confirmed with strong volume. On the other hand, if price should break below the L2 line, it means a negative signal, and it means that price would resume its downtrend.
| 4 Q Rolling PER | 5.83 times | Dividend Yield ） | 1.55% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2009 | 5.13 sen | 0.75% | 8.04% |
| 31/12/2008 | 6 sen | 2.14% | 6.63% |
| 31/12/2007 | 5.82 sen | 0.75% | 8.04% |
| 31/12/2006 | 0 sen | 0.00% | 6.90% |
| 31/12/2005 | 6 sen | 3.08% | 7.59% |
Table 3: Kossan – 7153, yearly dividend, dividend yield, and net profit ratio.
Conclusion:
As the KLCI managed to climb back to above the 14, 21, 31 EMA dynamic support, the overall marke t sentiment has turned back to positive, and many individual counters are also returning to their uptrend. However, it is still important not to catch cheap stocks which are falling. The correct way is to buy stocks that are resuming their uptrend.
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