Chart 1: KLCI as at 2/3/2011.
As indicated by A, other than the T1 downtrend line, the 14, 21, 31 EMA, is still serving as the dynamic resistance to the KLCI and in other words, the KLCI has to also break above the 14, 21, 31 EMA in order to break away from the downtrend movement. Although a break out above the 14, 21, 31 EMA would signal a break away from the downtrend, it does not necessary mean that the KLCI would immediately reverse and form an uptrend, and there is still a good chance that the KLCI would form a sideways consolidation as mentioned in last two weeks articles. In short, if the KLCI could stay in a consolidation above the 1480~1500, the new inflow of capital will gradually neutralize some selling pressure.
Meanwhile, as indicated by B, total market volume remains low recently, below the 40-day Volume Moving Average. This suggests that the market participation was low, as investors are being cautious, and this also implies that the investors confidence is low. Not only that, over the last few trading days, loser significantly outnumbered winners, and this reflects the overall negative market mood.
Despite the low participation from investors, the KLCI, or the market as a whole is still not showing sign of a bearish market signs, and it is still too soon to call for a bear market. As long as the KLCI could stay in a sideways consolidation, preferably above 1480, and the weak market sentiment would gradually neutralizes, and the KLCI could gear-up for a new movement; and if the new movement of the KLCI or the whole market should be a positive one, it would be time to pick up some stocks again.
Our case studies will be focusing on banking stocks this week.
Revision of last week's case study: CIMB – 1023: Remains in short term downtrend.
Chart 2: CIMB – 1023 as at 02/03/2011.
As shown on chart 2, price of CIMB remains resisted by the 14, 21, 31 EMA dynamic resistance, thus suggesting that the short term downtrend remains intact. Last week, CIMB has a low reaching RM7.84 and as it was getting closer to the RM7.80 support, it rebounded. This suggests that the support for CIMB is still at RM 7.80~RM 7.90.
Although price of CIMB was supported by the RM7.80 ~RM7.90 level, it does not mean that the this is the lowest level which CIMB could go. In fact, it is highly risky if any one should attempt to catch any bottom for now. Technically, price of CIMB has to break above the 14, 21, 31 EMA, and later forming a higher-low, then only it is a reversal signal.
Nevertheless, if price of CIMB should remain resisted by the 14, 21, 31 EMA, then it would re-test the RM7.80~RM7.90 support, and if price should break below this support, it would be making a 4 months plus new low, and the technical outlook shall remains negative.
| 4 Q Rolling PER | 16.33 times | Dividend Yield | 3.26% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2010 | 26.07 sen | 3.23% | 29.81% |
| 31/12/2009 | 18.5 sen | 1.46% | 26.31% |
| 31/12/2008 | 25 sen | 4.27% | 25.22% |
| 31/12/2007 | 25 sen | 2.27% | 31.00% |
| 31/12/2006 | 15 sen | 1.94% | 23.53% |
Table 1: CIMB – 1023, yearly dividend, dividend yield, and net profit ratio.
Maybank – 1155: In sideways consolidation.
Chart 3: Maybank – 1155 as at 02/03/2011.
Although price of Genting was affected by the recent selling down of the Asian markets, its price retreat was not severe, and it managed to stay above RM8.40~RM8.50 support. Therefore, it has not formed any downtrend, only a sideways consolidation. However, despite the sideways consolidation, a lower-high formation was seen and therefore, still suggesting a minor weakness for Maybank. Technically, to buy at this condition, the risk is still high.
As for those whom had already bought this counter earlier at a lower price, it is a good idea to hold, for the long term uptrend for Maybank is still intact. As shown on chart 3A, price of Maybank is still supported by the 14, 21, 31 weekly EMA, which has been serving as the long term uptrend dynamic support since May of 2009. Long term investors could gradually lift their profit taking level according toe the 14, 21, 31 Weekly EMA, to reduce trading risk while holding for the maximum potential of the uptrend.
Chart 3A: Maybank – 1155 Weekly chart.
| 4 Q Rolling PER | 15.04 times | Dividend Yield | 6.34% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 30/06/2010 | 55 sen | 6.77% | 20.57% |
| 30/06/2009 | 8 sen | 1.36% | 3.93% |
| 30/06/2008 | 52.5 sen | 7.45% | 18.13% |
| 30/06/2007 | 80 sen | 6.67% | 20.95% |
| 30/06/2006 | 85 sen | 7.94% | 22.07% |
Table 2: Maybank – 1155, yearly dividend, dividend yield, and net profit ratio.
Pbbank - 1295: Remains in long term uptrend.
Chart 4: Pbbank - 1295 as at 2/03/2011.
Out of many big cap banking stocks, the least affected counter is Public Bank, besides Hong Leong Bank. As shown on chart 4, price of Public Bank was having a retreat, but the overall uptrend remains unaffected.
Generally, Public Bank is one of the favorite pick for long term investors as well as many fund managers, due to its stability of price as well as consistency of dividend. Therefore, for long term investors, it is a good idea to hold this stock, as long as one should gradually lift the trailing stop level according to the 14, 21, 31 Weekly EMA, and this way, the long term investors could tap into the long term capital gain, while receiving a consistent dividend income, and also gradually reduce trading risk.
Please note that since May of 2009, price of Public Bank uptrend has been supported by the 14, 21, 31 Weekly EMA, and until now, the 14, 21, 31weekly EMA is still holding the uptrend of Public Bank firmly. As for those whom are interested in taking up new position, it is a good idea to wait for a market sentiment to return to positive, before picking up any counters.
| 4 Q Rolling PER | 14.96 times | Dividend Yield | 4.45% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2010 | 58 sen | 4.35% | 27.62% |
| 31/12/2009 | 55 sen | 4.55% | 25.91% |
| 31/12/2008 | 55 sen | 6.21% | 24.58% |
| 31/12/2007 | 75 sen | 6.82% | 22.22% |
| 31/12/2006 | 60 sen | 7.74% | 22.89% |
Table 3: Pbbank - 1295, yearly dividend, dividend yield, and net profit ratio.
Conclusion:
At any given moment, an investor should always be prepared, for the good and for the bad things. More importantly, he or she has to be self-disciplined, and must not be seduced by “low priced stocks”. One would not be surprised to realize that the market was never wrong in the past, nor in the future, it was the traders own mistake by not respecting the direction of the market, by going against with the flow of the market.
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