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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