Chart 1: KLCI as at 16/3/2011.
As shown on chart 1, although the KLCI was also affected by the negative impact of the Japan nuclear crisis, the downside movement of the KLCI was rather insignificant. As indicated by A, the KLCI had once broken below the 1474 support, but it managed to return to above the support level and this shows that the support for the KLCI remains at 1474~1480. If the KLCI could hold up above this level, the KLCI could prolong its sideways consolidation.
But still, with the KLCI below the 14, 21, 31 EMA the technical outlook for the KLCI remains on the lower side. If the KLCI should break below the 1474 again, it would be making a half year new low.
Understanding volume – continue.
Last week, we discussed the relationship of volume with price movement. This week, we shall look deeper into their relationship and the effect caused.
A: Price gain with volume up.
When price goes up associated with the rising of volume, we theoretically say that there are increased of new buyers (greed) to replace the old sellers (fear). Not only that, these new buyers are mostly paying a higher price to get in, and old sellers are asking for more premium to get out. This is a good sign, especially for break out of resistance. Study Chart 1A.
Chart 1A: Price up with volume.
B: Price up but volume unchanged:
When price continues to go up, but volume remains unchanged, or there are no significant increased of volume, it is rather normal. This shows that there is still positive volume flow as new buyers are basically still paying higher price to take their shares from old sellers. Provided volume stays almost the same, it is fine. Another factor we must consider is that when price is getting higher, the buying power of the same money is less. Therefore, it is getter harder and harder to get the equal amount of shares for the same money. However, when it comes to a break out of an important resistance, significant increased of volume is still in favor.
Next week, we shall continue in exploring other combination of price and volume. Below are this week's case studies.
Genting – 3182: Short term weakness, testing RM10 support.
Chart 2: Genting – 3182 as at 16/03/2011.
As shown on chart 2, since breaking below the 14, 21, 31 EMA on the 7th of February, price of Genting has been staying in a short term weakness trend, whereas the 14, 21, 31 EMA is serving as the dynamic resistance. However, indicated by A, price of Genting remains supported by the RM10.00 psychological support level. Generally, investors are more likely to remember round number, and therefore, it is called psychological support.
If price should break below RM10.000, it would be making a 6 months plus new low. In other words, all investors whom had bought Genting in the last 6 months, no matter at a lower price or higher price, will be losing money, or turning their profit into losses. Therefore, it would evoke more selling pressure.
In short, when price breaks below the support, selling pressure will increase and therefore, not a good idea to pick up at that time, or it could be viewed as a signal to cut loss. In other words, as long as the price is still staying below the 14, 21, 31 EMA, it is a good idea to stay away from it.
| 4 Q Rolling PER | 16.82 times | Dividend Yield | 0.78% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2010 | 7.80 sen | 0.75% | 14.50% |
| 31/12/2009 | 7.20 sen | 1.14% | 11.74% |
| 31/12/2008 | 7.00 sen | 1.89% | 6.27% |
| 31/12/2007 | 37 sen | 0.98% | 12.15% |
| 31/12/2006 | 32 sen | 0.97% | 21.66% |
Table 1: Genting – 3182, yearly dividend, dividend yield, and net profit ratio.
MRCB - 1651: Short term weakness.
Chart 3: MRCB - 1651 as at 16/03/2011.
As shown on chart 3, price of MRCB formed a Descending Triangle, with the L1 line being the dynamic resistance. Support is at RM 1.97~RM 2.00. A descending Triangle, is a consolidation pattern of price with weakness, for the L1 descending line is actually outlining the formation of lower-high, which is the early sign of a possible downtrend formation; while the support remains unchanged.
If price should break below the RM1.97~RM2.00 support, it would be making a 6 months new low. By then, it means more people will be losing money, and eventually creating more selling pressure. Technically, as long as price of MRCB is staying below the L1 line or the 14, 21, 31 EMA, the technical outlook for MRCB is expected to be weak, and it is not a good idea to buy right now. Next support is seen at RM1.77~RM 1.80.
If price should prolong it's sideways consolidation, price will eventually break away the L1 line, but it does not mean that price will form an uptrend reversal. Not until it forms a higher-low. Even so, investors should consider the overall market condition, volume et cetera.
| 4 Q Rolling PER | 39.88 times | Dividend Yield | 0.72% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2010 | 1.5 sen | 0.66% | 6.30% |
| 31/12/2009 | 1 sen | 0.73% | 3.76% |
| 31/12/2008 | 0 sen | 0.00% | -7.18% |
| 31/12/2007 | 0 sen | 0.00% | 4.51% |
| 31/12/2006 | 0 sen | 0.00% | 6.20% |
Table 2: MRCB - 1651, yearly dividend, dividend yield, and net profit ratio.
Airasia – 5099: Short term weakness.
Chart 4: Airasia – 5099 as at 16/03/2011.
As shown by chart 4, the price movement of Airasia is rather similar to the price movement of MRCB, and they both are staying below the L1 descending line as well as the 14, 21, 31 EMA. The short term view of Airasia is weak, but it is still above the RM2.40 support, thus the current condition is not devastating.
As indicated by A, price of Airasia tested the 14, 21, 31 EMA and the L1 line after rebounding from the RM 2.40 support. If price should break away from the L1 line, it would help the technical outlook of Airasia, back to neutral from the short term bearish biased movement. However, it does not mean a bullish reversal right away, not until price forms a higher-low.
On the other hand, if price should break below RM2.40, it would be making a near 6 months new low, thus creating more selling pressure, as all the investors whom had bought within this 6 month will be making losses, and turning their profit into losses. Therefore, it will be a sell signal.
| 4 Q Rolling PER | 6.58 times | Dividend Yield | 0.00% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2010 | 0 sen | 0.00% | 26.72% |
| 31/12/2009 | 0 sen | 0.00% | 17.27% |
| 31/12/2008 | 0 sen | 0.00% | -17.87% |
| 31/12/2007 | 0 sen | 0.00% | 38.90% |
| 31/12/2006 | 0 sen | 0.00% | 31.07% |
Table 3: Airasia – 5099, yearly dividend, dividend yield, and net profit ratio.
Conclusion:
Most of the time, when stock price forms a downtrend, it will first form a lower-high, followed by breaking a new low. However, the behavior of stock price varies with different stocks, and to identify these behavior, is actually not easy. That's why, it takes years to master this skill, and most failed.
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