Chart analysis is most important part of technical analysis, while technical indicators are a by products of price movement. In other words, price must first move, in order to move indicators signals. Therefore, many professionals are analyzing patterns over technical indicators. Among many chart patterns, Triangles are most common.
TWSCorp – 4804: Forms a Descending Triangle.
Chart 1: TWSCorp – 4804 as at 03/11/2010.
As shown on chart 1, price of TWSCorp started to retreat after hitting a resistance at RM1.00 on the 22nd of September, and since then, price of TWSCorp has been consolidating, while still supprted by the 14, 21, 31 EMA dynamic support.
At the same time during its consolidation, it forms a Descending Triangle, with RM0.87 as its support line, and the descending line as its dynamic resistance. When price is consolidating inside a Descending Triangle, its price fluctuations reduced gradually, and the direction would be uncleared, until a valid break out away from the triangle. In the case of a Descending Triangle, the consolidation shows some weakness, as the descending line already marked a formation of lower-high, which is a sign of weakness.
Nevertheless, since price is now at the tip of the Triangle, the break out signal is near the corner. If price should break below RM0.87 support, it means all investors who had bought this share above RM0.87 in this month will be turning their profit (if any) into losses, thus creating negative impact to the investors' memory. Also, if price should break below RM0.87, the 14, 21, 31 EMA would reverse its role to serve as the dynamic resistance, thus the technical outlook for TWSCorp would turn negative.
In the contrary, if price should break above the Descending Triangle, with strong volume, then form a higher-low above the 14, 21, 31 EMA, it would resumes its uptrend which started in July.
| Leading PER | 17.25 times | Dividend Yield | 0.00% |
| Dividend | Dividend Yield | ||
| 31/12/2009 | 0 sen | 0.00% | |
| 31/12/2008 | 0 sen | 0.00% | |
| 31/12/2007 | 0 sen | 0.00% | |
| 31/12/2006 | 0 sen | 0.00% | |
| 31/12/2005 | 0 sen | 0.00% | |
Table 1: TWSCorp – 4804, yearly dividend, dividend yield, and net profit ratio.
Follow up on last week's case study: Genting – 3182: Resisted at RM10.50.
Chart 2: Genting – 3182 as at 03/11/2010.
As shown on chart 2, price of Genting formed an Ascending Triangle, while consolidating, until now, it failed to break above RM10.50 resistance, but still, supported by the 14, 21, 31 EMA dynamic support. Since it is still forming higher-lows, the uptrend remains intact, but with limited upside room, until a break out above the RM10.50.
Meanwhile, volume traded on the 2nd of November increased significantly, suggested that there were lots of shares being changed hand. Fortunately, the changing hands of shares does not result in sharp fall of price, or else, it would had created a massive selling pressure.
If later, price of Genting should break above the RM10.50 resistance, then it would break away from its consolidation, and resume its uptrend. Ideally, the break out should be accompanied by strong volume, or else, there is a chance of a false break out.
In short, as long as price is still above the 14, 21, 31 EMA, it is a good idea to hold, as the uptrend is still intact. Provided a trailing stop trading plan is in place, the trading risk of a prudent investor should remain low.
| 4 Q Rolling PER | 24.38 times | Dividend Yield` | 0.69% |
| Dividend | Dividend Yield | ||
| 31/12/2009 | 7.2 sen | 1.14% | |
| 31/12/2008 | 7sen | 1.89% | |
| 31/12/2007 | 37 sen | 0.98% | |
| 31/12/2006 | 32 sen | 0.97% | |
| 31/12/2005 | 29 sen | 1.36% | |
Table 2: Genting – 3182, yearly dividend, dividend yield, and net profit ratio.
Maybank – 1155: Forms an Ascending Triangle.
Chart 3: Maybank – 1155 as at 03/11/2010.
As shown on chart 3, price of Maybank formed a similar Ascending Triangle, just like Genting. Price of Maybank tested the RM9.00~RM9.04 resistance a few times, but failed. However, the overall uptrend remains intact, as the price is still supported by the 14, 21, 31 EMA dynamic support with formation of higher-lows.
Technically, price of Maybank has to break above RM9.00~RM9.04 in order to resume its uptrend, or else, if price should prolong its consolidation, and later break below the 14, 21, 31 EMA, it would mark an end to the uptrend.
However, there is no need to take profit aggressively. This is because, even if price should break below the 14, 21, 31 EMA and the uptrend is over, it does not necessary mean that it would reverse and form a downtrend immediately. To form a downtrend, it usually will form a lower-high, which is a sign of weakness. There is also a chance of a trading range formation, just like what happened to Axiata for about a month recently, if the uptrend should temporary come to an end.
| 4 Q Rolling PER | 16.67 times | Dividend Yield | 6.12% |
| Dividend | Dividend Yield | ||
| 30/06/2010 | 55 sen | 6.77% | |
| 30/06/2009 | 8 sen | 1.36% | |
| 30/06/2008 | 52.5 sen | 7.45% | |
| 30/06/2007 | 80 sen | 6.67% | |
| 30/06/2006 | 85 sen | 7.94% | |
Table 3: Maybank – 1155, yearly dividend, dividend yield, and net profit ratio.
Conclusion:
A prudent investor is never rush, and he waits for signals, signals from a chart pattern. Therefore, the ability to identify patterns is more important and reading indicators signals.
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