Chart 1: KLCI ast at 23/2/2011.
As indicated by A, the KLCI tested the T1 downtrend line, and also the 14, 21, 31 EMA dynamic resistance, and the KLCI retreated, and resumed its downtrend, within the downtrend channel of the T1 and T1 lines. Technically, provided that the KLCI is still trending below the 14, 21, 31 EMA, the technical outlook is still negative.
Although the KLCI is still trending down in the downtrend channel, it has not broken 1500 psychological support level. We would like to remind our readers that the characteristic of a downtrend formation is lower-High, and later new low. This is because, when price breaks new low, it means more investors (including those whom are already in profit) will be losing money, or turning their profit into losses. As a result, it will trigger more selling pressure, and create more negative memory in the downtrend.
As mentioned last week, if the KLCI could find its support above 1500, then the KLCI or the market would have a chance to temporary prevent the downtrend for getting worse, by forming a sideways consolidation. And if so, after a while, the new inflow of fresh capital will eventually neutralize some selling pressure, and then, the KLCI or the market would have a better position to start a new trend. In other words, if the KLCI could stay above 1480~1500, the bear is still away from sight.
CIMB – 1023: Short term downtrend remains intact.
Chart 2: CIMB – 1023 as at 23/02/2011.
As shown on chart 2, since breaking below the T1 uptrend line, price of CIMB has been falling, and forming a short term downtrend, and the 14, 21, 31 EMA is serving as the dynamic resistance. Technically, provided that price is still below the 14, 21, 31 EMA, the technical outlook is still on the negative side. Despite last week's rebound, price of CIMB was still resisted by the 14, 21, 31 EMA, as indicated by A, forming a lower-high, and the short term downtrend remains intact.
Next support for CIMB is at RM7.80~RM7.90, and this is a support since October, 2010, and also the 50% Fibonacci Retracement Line by calculating using the low of RM 6.58 and the high of RM9.17.
Generally, it is likely that price could temporary find its support at RM 7.80. However, it is important not to misunderstand the meaning of a support. A support does not mean that it will be the lowest price that price could go, but instead, it only implies a possible level of a rebound, and hopefully after a rebound, price could move sideways and if price could move sideways, over time, new inflow of capital could neutralize some selling pressure. However, as of now, if price should stay below the 14, 21, 31 EMA, there is no buy signal, until price of CIMB should form a higher-low.
| 4 Q Rolling PER | 11.41 times | Dividend Yield | 2.26% |
| 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.
Rhbcap – 1066: Short term downtrend.
Chart 3: Rhbcap – 1066 as at 23/02/2011.
As shown on chart 3, price of RHBCAP rebounded from RM7.80 support, but failed to break above the 14, 21, 31 EMA, forming yet another lower-high. As indicated by A, if price should remains resisted by the 14, 21, 31 EMA, the downtrend shall remain intact.
Again, a downtrend characteristic is price forming lower-high first, then breaking below a support, forming a new low. Therefore, if price of RHBCAP should later break below RM7.80, it would be making a 4 months new low, and more downside movement is expected for RHBCAP.
While it may seem like a discount with price falling, and some untrained investors might take is as a good time for some bargain buying. It is important for us not to forget the effect of a new low, and consider those whom are trapped in the new low, the losers.
In reality, when price breaks new low, more investors are losing money, even those whom were making profit are now turning their profit into losses. Therefore, selling pressure is expected to be high.Take the example of RHBCAP, if price should break below RM7.80, then all investors whom had position for the last 4 months will be losing money, and their original intention of making money will slowly be replaced by a new intention, unconsciously, which is to 'break even'.
| 4 Q Rolling PER | 12.27 times | Dividend Yield | 3.26% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2010 | 26.38 sen | 3.23% | 23.10% |
| 31/12/2009 | 22.45 sen | 4.25% | 22.14% |
| 31/12/2008 | 19.60 sen | 5.03% | 17.48% |
| 31/12/2007 | 13.60 sen | 3.66% | 21.44% |
| 31/12/2006 | 8.00 sen | 2.34% | 7.96% |
Table 2: Rhbcap – 1066, yearly dividend, dividend yield, and net profit ratio.
IOICorp - 1961: Short term Dowtnrend.
Chart 4: IOIcorp - 1961 as at 23/02/2011.
As shown on chart 4, since breaking below the 14, 21, 31 EMA on the 21st of January, price of IOIcorp has been forming a short term downtrend, with the 14, 21, 31 EMA serving as the dynamic resistance. Technical outlook for IOIcorp is on the negative side.
Although price of IOIcorp was recently supported by RM5.30~RM5.40, the downtrend remains intact, as indicated by A, price formed another lower-high at 14, 21, 31 EMA. If price should later break below RM 5.30~RM5.40 support, it would be making a 4 months new low, which would trigger more selling pressure, and more negative memory. Therefore, a wise thing to do is to avoid this stocks unless it could break above the 14, 21, 31 EMA, and form a higher-low. Nevertheless, next support for IOIcorp is at RM 5.20 and followed by RM5.00.
| 4 Q Rolling PER | 16.54 times | Dividend Yield | 3.10% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 30/06/2010 | 17 sen | 3.28% | 16.23% |
| 30/06/2009 | 8 sen | 1.69% | 6.74% |
| 30/06/2008 | 17 sen | 2.28% | 15.22% |
| 30/06/2007 | 7 sen | 1.35% | 16.55% |
| 30/06/2006 | 43.5 sen | 3.04% | 13.81% |
Table 3: IOIcorp - 1961, yearly dividend, dividend yield, and net profit ratio.
Conclusion:
If the KLCI should break below 1480 support, and the above mentioned stocks were to break below their support, they would have made a 4 months new low, all together (more blue chips stocks are testing their 4 months support as well). Eventually, they will create a same reaction to the market in general, by triggering more selling. Therefore, we as an individual investor should always following the market trend, and avoid going against this massive movement.
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