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 plantation stocks.
Revision of last week's case study: KLK – 2445: Forming short term downtrend.
Chart 2: KLK – 2445 as at 02/03/2011.
As shown on chart 2, price of KLK fell blow the RM21 support, and touched its low at RM19.20 last week. However, after being over-sold, price of KLK rebounded and managed to return to above RM20.00, and RM20 is now the current support. (Study A)
Despite the short term over-sold condition, the immediate outlook for KLK is still on the negative side, as it has formed a lower-high, which is an early sign of a downtrend formation. If price of KLK should remains resisted by the downtrend line (dotted line), or the 14, 21, 31 EMA dynamic resitance, then the negative technical outlook shall continue.
The RM20 support was formed since October 2010, and if price should break below this support, it would be making a 4 months plus new low, which would eventually trigger more selling pressure. In short, price of KLK has to break above the 14, 21, 31 EMA, in order to steer away from this short term downtrend.
| 4 Q Rolling PER | 20.08 times | Dividend Yield | 2.96% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 30/09/2010 | 60 sen | 3.00% | 13.51% |
| 30/09/2009 | 40 sen | 2.90% | 9.20% |
| 30/09/2008 | 70 sen | 7.29% | 13.25% |
| 30/09/2007 | 50 sen | 3.79% | 13.70% |
| 30/09/2006 | 50 sen | 4.59% | 11.06% |
Table 1: KLK – 2445, yearly dividend, dividend yield, and net profit ratio.
IOIcorp - 1961: Remained in short term downtrend.
Chart 3: IOIcorp - 1961 as at 2/03/2011.
As shown on chart 3, despite price of IOIcorp rebounding from the RM5.40 support, the immediate technical outlook remains on the negative side, as the 14, 21, 31 EMA is still serving as the dynamic resistance. Thus the short term downtrend remains intact.
If price should being to retreat after resisted by the 14, 21, 31 EMA, it would form another lower-high, which is a characteristic of a downtrend. At the moment, there is no ideal buy signal for in order to break away from the short term downtrend, price of IOIcorp has to first break above the 14, 21, 31 EMA, then forming a higher-Low, then only it is an ideal buy signal.
Nevertheless, if price should stay in the downtrend, and later break below the RM5.30 support, it would be making a 4 months plus new low, and the selling pressure would likely to be higher.\
| 4 Q Rolling PER | 16.75 times | Dividend Yield | 3.06% |
| 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 2: IOIcorp - 1961, yearly dividend, dividend yield, and net profit ratio.
GENP – 2291: Short term downtrend still intact.
Chart 4: Genp - 2291 as at 2/03/2011.
As shown on chart 4, after breaking below the 14, 21, 31 EMA in January, price of GENP has been staying in a short term downtrend, with the 14, 21, 31 EMA serving as the dynamic resistance. Technically, the immediate technical outlook for GENP shall stay negative as long as price of GENP is still resisted by the 14, 21, 31 EMA.
As shown on the chart above, price of GENP is testing the RM7.40~RM 7.50 support, and this was a new high level on the 5th of August, 2010. Previous, it was a resistance for GENP, until a break out above this level, it reversed its role to becoming a support. If price of GENP should remain supported by RM7.40~RM 7.50, there is a chance for GENP to consolidate, but the short term downtrend shall remains intact, unless price of GENP could successfully break above the 14, 21, 31 EMA.
When price rebound from a downtrend, it is not really the best time to buy. If price should remains resisted by the 14, 21, 31 EMA and started falling again, it is viewed as a good timing to cut loss and reduce losses. Technically, price has to break above the 14, 21, 31 EMA, and then forming a higher-low, then only it is an ideal buy signal.
| 4 Q Rolling PER | 18.01 times | Dividend Yield | 1.62% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2010 | 12.5 sen | 1.57% | 32.80% |
| 31/12/2009 | 9 sen | 1.46% | 31.19% |
| 31/12/2008 | 10 sen | 2.82% | 36.03% |
| 31/12/2007 | 14 sen | 1.62% | 37.96% |
| 31/12/2006 | 7 sen | 1.64% | 29.68% |
Table 3: Genp - 2291, yearly dividend, dividend yield, and net profit ratio.
Conclusion:
Any breakout above the resistance, or below the support, does not necessary form a reversal of trend immediately. It takes time to form a reversal, for people need time to accept the turning of the direction. In other words, the market need more and more people buying and starting to make money, to create more greed and buying interests. On the contrary, we need more people to buy but loss money, and later feeling regret, then only a downtrend could form. The period between uptrend and downtrend, is the trendless fluctuation of price, and this is where it forms Triangles, Rectangular, or sort of patterns, called a consolidation; and this period will be the hardest challenge to most investors whom would put their patience and perseverance to a test.
Copyright © 2009 Straits Index (M) Sdn BhdImportant Disclaimer:These content provided by Straits Index (M) Sdn Bhd is solely for education and information purposes only, and do not suggest any investment advices. All information displayed are believed to be accurate and reliable. Interpretation of the data or analysis is at the reader's own risk. Straits Index (M) Sdn Bhd reserves the rights but obligations to update, admen, or even terminate the materials. 重要声明:以上的内容由海峡指数(马)私人有限公司提供,纯粹是教育性质, 并不是任何的投资忠告。所有资料显示认为是准确和可靠的。对数据或分析的解释和用途是在于用户自己的风险。海峡指数(马)有限公司持有保留及义务更新,甚 至终止材料的权利。
