Digi makes an all-time new high!

One day after my article entitled "Digi caught in a bind", Digi makes an all-time new high. Before this, Digi's all-time high was at RM11.30 chalked on July 7, 2006 (see the Charts below). At 4.00 p.m., the stock is at RM11.50.

For technical analyst, a stock that makes a new high is a bullish stock. As a rule, you should consider buying such stocks and not selling them. This is contrary to my earlier post, which has suggested that you should consider paring down your position in Digi. How should we resolve this conflicting situation. I would suggest the following:

1. Ignore the technical buy signal. Do not buy into Digi.
2. Instead of selling into strength, hold back the selling of Digi until the share price has dropped below a pre-determined level. What should that level be? You may want to set that price at a certain amount, say RM1.00, below the preceding day's closing price. If you set this price too tightly (say at RM0.50 lower), chances are that you would be "stopped out" fairly early. If you set it too loosely (say at RM2.00 lower), you would be giving away too much profit.

After that, you need to monitor the share price closely to ensure that the stock has not broken down & triggered your pre-determined "stopped out" level. For those who has this stock, stay with it & ride it all the way. Good luck.

















Chart 1: Digi's monthly chart as at July 19


















Chart 2: Digi's daily chart as at July 19