The KLCI had tested the 1576 resistant many times, and failed, and therefore, chances of a technical correction is high. What are the signs that investors should be watching out during the market correction? When is the time to take profit?
SPSETIA – 8664: High volume associated with correction, suggesting strong selling pressure.
Chart 1: SPSETIA – 8664 as at 19/01/2011.
As shown on chart 1, price of Spsetia had its peak of RM6.93 on the 13th of January, and since then, price started to decline as a technical correction, and it is rather normal. However, as indicated by A, when price started to retreat, volume increased significantly, and this implies that despite new inflow of capital, sellers were initiating the trade by selling lower to new buyers. This implies that the selling pressure is higher. And the same time happened on the 18th of January, as indicated by B.
Fortunately, despite the increased of selling pressure, price of Spsetia remains above the 14, 21, 31 EMA dynamic support, and this suggests that the uptrend is still intact. Therefore, for trend trading investors, it is a good idea to hold as long as price is still supported by the 14, 21, 31 EMA dynamic support. But it is important that these investors to adjust the profit taking level buy lifting it according to the 14, 21, 31 EMA.
As for those whom are interested in taking up new position, please consider the effect of the higher selling pressure, as it implies that it would be harder for price to return to its peak of RM6.93.
In short, due to the higher selling pressure, investors are advised to take extra caution and honor the original trading and cut loss plan. Even if price could rebound from the 14, 21, 31 EMA, we should also watch out if price would form a lower-high, and if so, it would be a first signal suggesting a possible reversal.
| 4 Q Rolling PER | 25.88 times | Dividend Yield | 3.12% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/10/2010 | 20 sen | 3.58% | 14.42% |
| 31/10/2009 | 14 sen | 3.62% | 12.16% |
| 31/10/2008 | 17 sen | 6.12% | 16.07% |
| 31/10/2007 | 18.4 sen | 2.36% | 22.54% |
| 31/10/2006· | 22.5 sen | 5.74% | 20.81% |
Table 1: SPSETIA – 8664, yearly dividend, dividend yield, and net profit ratio.
DRBHCOM – 1619: Technical correction, testing uptrend dynamic support.
Chart 2: DRBHCOM – 1619 as at 19/01/2011
As shown on chart 2, price of DRBHCOM has recently went up to RM2.27, and retreated as a form of a technical correction. Price fell RM0.25 or 11%. However, as indicated by A, price of DRBHCOM is temporary supported by the 14, 21 ,31 EMA, and this suggests that the uptrend is still intact.
If price should continue to rebound, it would be forming a higher-low, and for those whom are already in position, it is a good idea to hold, as long as lifting the profit taking level higher according to the 14, 21, 31 EMA level. This way, it will gradually reduce the trading risk while maximizing the potential of the uptrend.
Although it is said that the uptrend is still intact, the outlook of individual counters are highly affected by the effect of the broader market correction. In other words, we should be cautious, and watch out for any lower-high formation despite that price is still staying above the 14, 21, 31 EMA, for when price should form a lower-high, it would be a first signal suggesting a possible reversal. Please refer to Chart 2A for a downtrend characteristic of DRBHCOM.
Chart 2A: DRBHCOM – 1619 : from 29/10/2007 to 13/3/2008, downtrend characteristic.
| 4 Q Rolling PER | 6.22 times | Dividend Yield | 1.90% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/03/2010 | 4 sen | 4.12% | 7.48% |
| 31/03/2009 | 15.83 sen | 22.94% | 10.83% |
| 31/03/2008 | 5 sen | 3.94% | 7.27% |
| 31/03/2007 | 3.5 sen | 1.79% | 3.27% |
| 31/03/2006 | 2 sen | 1.39% | -5.79% |
Table 2: DRBHCOM – 1619, yearly dividend, dividend yield, and net profit ratio.
BJCORP – 3395: Failing to form an uptrend.
Chart 3: BJCORP – 3395 as at 19/01/2011.
On the 4th of January, price of Bjcorp broke above the RM1.15 resistance, breaking away from the trading range which lasted for almost 4 months. However, price of Bjcorp did not form any higher-Low, and therefore, it has not shown any sign of an uptrend formation.
As indicated by A, price of Bjcorp went up to RM1.29 after breaking above the RM1.15 resistance, but has profit taking activities started to take place, it started falling. Usually, during this time, it is the crucial timing for investors to watch out for any higher-Low formation. Unfortunately, price of Bjcorp failed to form a higher-low, but instead, breaking below the 14, 21, 31 EMA. Therefore, there is no buy signal, even after breaking away from the trading range.
With the price of Bjcorp currently staying below the 14, 21, 31 EMA, the technical outlook for Bjcorp is on the lower side, until price could successfully breaking above the 14, 21, 31 EMA. Support for Bjcorp is seen at RM1.00~Rm1.05 while the resistance is at RM1.25~RM1.29.
| 4 Q Rolling PER | 24.89 times | Dividend Yield | 0.88% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 30/04/2010 | 1 sen | 0.79% | 1.23% |
| 30/04/2009 | 3.35 sen | 3.99% | -0.83% |
| 30/04/2008 | 9 sen | 8.11% | 17.20% |
| 30/04/2007 | 0 sen | 0.00% | 5.75% |
| 30/04/2006 | 0 sen | 0.00% | -24.33% |
Table 3: BJCORP – 3395, yearly dividend, dividend yield, and net profit ratio.
Conclusion:
Since the broader market is having a technical correction, the market sentiment is some what affected as investors are being cautious. Therefore, many individual counters are expected to have a similar technical correction effect. At this time, investors are advised to honor their own trading plan, and when price has turned against you, or the uptrend is violated, the right thing to do is to execute the cut loss plan or take profit.
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