Chart 1: KLCI as at 16/2/2011.
Technically, as long as the KLCI is still trading within the downtrend channel, the technical outlook is expected to be weak, even if the KLCI could rebound from the 1500. In other words, the KLCI has to break above the T1 line successfully to break away from this negative trend.
Other than the 1500 psychological support, the next support for the KLCI is at 1480. As for whether the KLCI is heading towards a bear market, it is still too soon to call. This is because the KLCI is still supported by the 14, 21, 31 Weekly EMA, which is the long term uptrend dynamic support since March of 2009. Meanwhile, the recent correction of the KLCI had mostly affect some blue chips counters, whereas, other non-blue chips stocks are not much affected. In addition to that, during this correction, only the Asian markets were affected, while the US and European markets are basically still trending up. Therefore, if the KLCI should consolidate above 1500, and the US and European markets are still doing well, the local market sentiment is likely to regain some of this ground.
Below are this week's Case Studies:
CIMB – 1023: Uptrend violated.
Chart 2: CIMB – 1023, as at 16/02/2011.
As shown on chart 2, after breaking below the 14, 21, 31 EMA on the 21st of January, price of CIMB is now still below the 14, 21, 31 EMA, and therefore, the 14, 21, 31 EMA is serving as a dynamic resistance, and the technical outlook is weak.
Meanwhile, other than resisted by the dynamic resistance, price of CIMB also formed a lower-high on the 9th of February, and this is outlined by the T1 downtrend line. Based on the current chart reading, it has formed a short term downtrend. Therefore, there is no ideal entry signal at this moment, and trying to catch a rebound is a risky move. Next support for CIMB is seen at RM 7.80~RM 7.90.
Chart 2A: CIMB – 1023, weekly chart.
Not only that it has formed a short term downtrend, it is also testing the 31 week EMA, which is the long term uptrend dynamic support. As shown on Chart 2A, since entering its uptrend in March of 2009, its price had always been supported by the 14, 21, 31 Weekly EMA, and although there were many correction during this long term uptrend, price of CIMB had never broken below the 31-week EMA. If price should break below this important dynamic support, it suggests that the long term uptrend is violated.
| 4 Q Rolling PER | 11.28 times | Dividend Yield | 2.28% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 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% |
| 31/12/2005 | 15 sen | 2.63% | 17.51% |
Table 1: CIMB – 1023, yearly dividend, dividend yield, and net profit ratio.
Muhibah – 5703: Forming Descending Triangle.
Chart 3: Muhibah – 5703 as at 16/02/2011.
The recent market correction has affected mostly blue chips. As shown on chart 3, price of Muhibah was also affected, and it had a correction too. However, the correction was rather mild, with its price remained supported by the RM1.60~RM1.65 support.
After being supported by the RM 1.60~RM1.65, price of Muhibah gapped up but failed to reach its previous peak of RM1.93. Instead, it started to retreat and formed a lower-high, which is outlined by the L1 line. Together with the RM 1.60~RM 1.65 support and the L1 line, it suggests that Muhibah is forming a Descending Triangle consolidation.
Technically, when price is forming a Descending Triangle, it implies a consolidation with a little bearish bias. This is because although the support remain unchanged, the resistance is actually gradually falling (lower-high). Even if price should extend its sideways consolidation, it would break away the L1 line also, but this does not mean a buy signal, unless price should form a higher-low followed by the break out. On the contrary, if price should break below the RM1.60~RM1.65 support, chances of a bearish reversal would be higher.
| 4 Q Rolling PER | 36.13 times | Dividend Yield | 1.49% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2009 | 2.5 sen | 2.72% | 0.64% |
| 31/12/2008 | 2.5 sen | 2.53% | 1.02% |
| 31/12/2007 | 4.5 sen | 1.20% | 4.94% |
| 31/12/2006 | 7.5 sen | 2.88% | 3.06% |
| 31/12/2005· | 4 sen | 5.76% | 2.68% |
Table 2: Muhibah – 5703, yearly dividend, dividend yield, and net profit ratio.
Revision of Last Week's Case Study: Tenaga - 5347: Technical Rebound in Downtrend.
Chart 4: Tenaga - 5347 as at 16/02/2011.
As shown on chart 4, price of Tenaga rebounded from RM5.94 or rounding up at RM6.00 support. However, it is still below the 14, 21, 31 EMA dynamic resistance, and this suggests that the downtrend is still intact. Readers are advised to study the characteristic of the downtrend, which is lower-high and new low. If price should be resisted by the dynamic resistance again, and started to retreat, it would form another lower-high.
Although there were a few rebound along the downtrend, price of Tenaga failed to break above the dynamic resistance. If one should think that every time price rebound would be the 'lowest' price, then there will be many investors feeling regret in the downtrend.
In short, selling pressure is expected to be stronger in the downtrend, this is because those who tried to catch the bottom, are now losing money, and their intention to 'make money' when they took the position is now over-taken by the new intention, rather subconsciously, which is to 'break even'. To understand this is not difficult, but it is against human nature, which is to buy things cheap when possible. This explains why an untrained person will have urges to buy when price is falling.
| 4 Q Rolling PER | 8.32 times | Dividend Yield | 4.23% |
| 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 3: Tenaga - 5347, yearly dividend, dividend yield, and net profit ratio.
Conclusion:
Trend following takes more than just the skill to identify uptrend or downtrend, it also takes patience and confidence, which takes years for an individual to master, and sadly, only few make it.
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