Chart 1: KLCI as at 9/3/2011.
As indicated by A, the KLCI attempted to break the 1525 resistance line, but failed. Therefore, the KLCI is, at most, trading in a trading range. Meanwhile, as indicated by B, total market volume remains low. Generally, volume has to be above the 40-day Volume Moving Average, in order to suggests that the market is fueled with sufficient participation, which then only have a chance to push the market to a higher level.
What is volume:
It is a common mistake that investors believe that more buyers than seller, price would go up, or the reverse. However, this is totally incorrect. In the process of a complete trade, the number of buyers must be equal with the number of sellers. If any one who wishes to sell his share, there must be an equal amount of shares which the opposite buyer is willing to buy, then only the seller could off load his shares. Basically, volume is a record of the frequency of shares changing ownership.
If volume was only there to record the changes of ownership, it is not much of a meaning. However, when we combine the analysis of price with volume, it provides a better picture of the emotions of traders involved. For example, if a stock price opened at RM1.00 and closed at RM1.10, it rose 10 cents. If today's volume is 10,000 shares, it means there were 10,000 shares sold to new buyers. Then you should ask the next question, did the buyer pay a higher price to get the 10,000 from the existing sellers? The answer is yes.
Let's take a deeper look into the scenario. What is the intention of sellers? Seller sell because they are fearful. They are afraid that price may not go up further more, or price could start falling. It does not matter if the sellers are taking profit or cutting losses, the moment they wanted to sell, they are in fear. On the contrary, what is the intention of buyers? Buyers take risk to buy shares because they are greedy. Whether they are buying new position or topping up positions, they must believe that price could go higher or else, who would want to take risk? Next, we shall look at the price changes as a result of the trading between a fearful seller and a greedy buyer. If price should ended higher after trading, did the seller ask for a higher premium? If so, the buyers must have paid, willingly, a higher price to get their share from the sellers. In this case, who initiated the trade? It is the buyer. On the opposite, if price ended lower, it was the fearful seller who initiated the trade. Therefore, we always mention that when price fall with huge volume, it means the selling pressure is stronger.
The above explanation only illustrate the changes of price, in result of the conflict of buyer's greed and seller's fear for 1 day. How does this affect the coming movement of price? We will continue this discussion next week.
TM – 4863: Uptrend remains intact.
Chart 2: TM – 4863 as at 09/03/2011.
Despite the correction of the KLCI which has pulled down many of the blue chip counters, price of TM not only unaffected, it is still trending in its short term uptrend. As shown on chart 2, price of TM forms higher-low above the T1 uptrend line, and it has been making new highs, which fulfilled the characteristic of a healthy uptrend.
Technically, as long as price of TM could stay above the T1 uptrend line or the 14, 21, 31 EMA dynamic support, the technical outlook for TM shall remain positive. Therefore, for those whom are already in position, it is a good idea to hold, as long as you could gradually lift your cut-loss or profit taking level higher, accordingly to the 14, 21, 31 EMA, to reduce trading risk.
As for those whom are interested in taking up new position, it is better to wait for the next formation of higher-low, then only consider to buy. However, it is important that one should consider the broad market condition before buying any stock right now, for the market sentiment is still at cautious, while market volume is still low. Actually, chances of the KLCI moving sideways is higher than forming an uptrend right now.
| 4 Q Rolling PER | 11.73 times | Dividend Yield | 6.56% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2010 | 26.10 sen | 6.78% | 13.72% |
| 31/12/2009 | 23 sen | 6.87% | 7.47% |
| 31/12/2008 | 26.25 sen | 8.52% | 9.13% |
| 31/12/2007 | 113 sen | 10.09% | 14.28% |
| 31/12/2006 | 46 sen | 4.72% | 12.62% |
Table 1: TM – 4863, yearly dividend, dividend yield, and net profit ratio.
Topglov - 7113: Still in short term downtrend.
Chart 3: Topglov – 7113 as at 9/03/2011.
With the exception of last two months correction, the market in general was doing well. However, as shown on chart 3, price of Topglov was still trending down.
From October to December, 2010, price of Topglov has attempted to break the RM5.80 resistance many times, but as soon as price was getting closer to the resistance level, selling pressure pushed price lower. Eventually, it broke away from the sideways movement, and started a downtrend, as indicated by T1.
Readers can clearly see that the T1 downtrend line is outlining the formation of lower-high, which is the sign of a downtrend. Although there were many rebound during the downtrend, price of Topglov failed to break above the T1 downtrend line, and even broke below the RM4.90~RM 5.00 support, marking a new low. Therefore, it is not wise to buy at this moment. In additional, please note that it is normal to have lower volume during a downtrend, which is also another sign of a downtrend.
| 4 Q Rolling PE | 8.43 times | Dividend Yield | 4.70% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/08/2010 | 23 sen | 4.04% | 11.80% |
| 31/08/2009 | 22 sen | 3.17% | 11.04% |
| 31/08/2008 | 11 sen | 2.71% | 8.01% |
| 31/08/2007 | 9.22 sen | 1.31% | 8.38% |
| 31/08/2006 | 9 sen | 1.04% | 7.90% |
Table 2: Topglov – 7113, yearly dividend, dividend yield, and net profit ratio.
UEMland – 5184: Forming a Descending Triangle.
Chart 4: UEMland – 5184 as at 9/03/2011.
As shown on chart 4, price of UEMland formed a Descending Triangle Consolidation pattern, with the L1 line outlining the lower-high formation, and L2 (RM 2.64) being the current support level.
The Descending Triangle is a consolidation pattern with some negative bias, as the price already formed lower-high, but fortunately, it has not broken below its support, thus not creating a strong selling pressure yet. As indicated by A, price of UEMLand rebounded slightly from L2 line, and now is set to test the L1 line. If price should break above the L1 line, it would break away from the negative biased consolidation pattern, but it will not immediate form an uptrend, unless price could form a higher-low. On the contrary, if price should break below the L2 support, the risk of forming a downtrend would be higher.
Meaning, it is noticeable that the volume is on the higher side during the Triangle Consolidation, and this is not normal. Usually, when price should consolidate, volume is lower, as investors are being cautious while waiting for a clearer signal.
As indicated by B, trading volume for UEMland has been seen on the higher side for the past 1 month, and this suggests that some increased of buying interests to replace some fearful selling reducing their position. However, a higher volume register a higher intensity of the conflict between greedy buyers and fearful sellers. Therefore, should volume increases during a consolidation, it will mark a stronger memory at this consolidation level. (RM 2.60~RM 2.80.)
In other words, if price should later break above the L1 line, then RM2.60~RM2.80 would become a strong reference of support later. On the other hand, if price should break below RM2.60~RM2.80, then this will mark a strong resistance level, for this is going to be a 'break-even' level for many of the greedy buyers. In short, if price should break below RM2.60, it is a good idea to cut loss.
| 4 Q Rolling PER | 47 times | Dividend Yield | 0.00% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2010 | 0 sen | 0.00% | 41.42% |
| 31/12/2009 | 0 sen | 0.00% | 28.44% |
| 31/12/2008 | 0 sen | 0.00% | 14.50% |
Table 3: UEMland – 5184, yearly dividend, dividend yield, and net profit ratio.
Conclusion:
"More buyers than sellers, price goes up." This saying is not only outdated, it is totally wrong because in the process of trading, the number of buyers must be the same with sellers. Price changes due to the imbalanced of the buyers' greed and sellers' fear. The act of buying or selling is more emotional than rational. However, buyers and sellers are always in total conflicts, where buyers want to buy as low as possible, and the reverse is true for sellers. Volume marks the number of times of share changing owners, and the higher of the volume, register a stronger memory of price, thus giving a deeper impression that will affect the future price movement.
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