Chart 1: KLCI as at 20/4/2011.
As indicated by A, the FBM KLCI rebounded near the 1513 support on the 20th of April, and now testing the 14, 21, 31 EMA. If the KLCI could successfully break above the 14, 21, 31 EMA, it would likely to form a higher-low, which is a first characteristic of an uptrend formation. Next resistance for the KLCI is at the recent high of 1566 and the historical high of 1577.
Meanwhile, as indicated by B, total market volume remains low despite increasing slightly. Generally, with volume below the 40-day Volume Moving Average, it suggests that the market participation is low, and the inflow of fresh capital is also low. Therefore, the KLCI is less likely to pickup its strength.
This week's case studies:
MPHB – 3895: Breaking new high.
Chart 2: MPHB – 3895 as at 20/04/2011.
As indicated by A, price of MPHB successfully rebounded from the rising 14, 21, 31 EMA in April, and extended its uptrend, breaking new high. Therefore, for those already in position, it is a good idea to hold, provided that one should gradually lift the cut-loss level or profit taking level higher according to the 14, 21, 31 EMA, to reduce trading risk. This is the idea of trailing stop.
As for those whom are interested in taking up new position, one has to first set a base line, and consider the risk of the entry price with this base line, before buying. This is because price might not immediately continue its uptrend, and possibly enter a consolidation stage first. Therefore, new buyers may not be able to apply the 14, 21, 31 EMA immediately, unless price of MPHB continues to rise.
If price should consolidate, then these investors would have to honor their base line, set prior their entry. If price should break below this base line, it either means that the uptrend is violated, or the risk is higher than you can handle, and the logical thing to do is to cut loss.
| 4 Q Rolling PER | 10.78 times | Dividend Yield | 2.96% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2010 | 9 sen | 3.45% | 8.39% |
| 31/12/2009 | 9 sen | 4.66% | 10.15% |
| 31/12/2008 | 10 sen | 9.26% | 4.31% |
| 31/12/2007 | 11 sen | 4.74% | 11.71% |
| 31/12/2006 | 0 sen | 0.00% | 36.54% |
Table 1: MPHB – 3895, yearly dividend, dividend yield, and net profit ratio.
Genm – 4715: Pull back after breaking new high.
Chart 3: Genm – 4715 as at 20/04/2011.
As shown on chart 3, price of Genm broke new high on the 31st of March, and later price pulled back, entering a consolidation. Fortunately, when pull back, price of Genm remained above RM 3.65. Meanwhile, as indicated by A, price of Genm also supported by the 14, 21, 31 EMA, and this suggests that the technical outlook for Genm is still positive.
Technically, price of Genm has to stay above the 14, 21, 31 EMA or else, the uptrend will be affected. Therefore, those whom are already in position can choose to hold, while new buyers will have to wait for a higher-low to buy. As for long term investors, it is a good idea to refer to the weekly char of Genm for a bigger picture view.
| 4 Q Rolling PER | 16.49 times | Dividend Yield | 2.16% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2010 | 8.00 sen | 2.42% | 23.94% |
| 31/12/2009 | 7.30 sen | 2.68% | 26.52% |
| 31/12/2008 | 7.00 sen | 3.10% | 12.98% |
| 31/12/2007 | 6.48 sen | 1.67% | 35.74% |
| 31/12/2006 | 27 sen | 1.85% | 24.84% |
Table 2: Genm – 4715, yearly dividend, dividend yield, and net profit ratio.
Pchem – 5183: Uptrend remains intact.
Chart 4: Pchem – 5183 as at 20/04/2011.
As shown on chart 4, despite retreated from its recent high of RM 7.60, price of Pchem remains supported by the 14, 21, 31 EMA, and this suggests that the uptrend remains intact. Therefore, one could choose to hold, provided using a trailing stop method with the 14, 21, 31 EMA as a reference.
As indicated by A, after being supported by the 14, 21, 31 EMA, price of Pchem started to tick up, and it could be forming a higher-low again. Therefore, it could be viewed as a buy signal. For new buyers, it is advisable to take RM 6.80 as a base line, which is the mental maximum loss level. If price should continue rising, then only one could use the 14, 21, 31 EMA as a trailing stop.
Conclusion:
It is very important that one should honor his own base line. Once the stock price break below this level, it means that either the market has changed, or your analysis was wrong. Either way, it is hurting your equity. Those whom are not honest to themselves remove the base line, and continue to hold, would eventually pay a huge price.
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