There is nowhere to hide?

The second- and third-liners were sold down earlier, which include the Mesdaq & Second Board stcoks. The bluechips were ditched later, which include the finance stocks & lately the plantation stocks. Where can you hide? How about well-managed pricey blue-chips? The crème de la crème of Malaysian equity, such as BAT , DIGI and Nestle? They should be safer, right? Let's see...

Today, we have a report from CITI Investment Research, which has downgraded DIGI (closed at RM20.90 yesterday) from a "buy" to "sell", partly due to current weak market sentiment and its disappointing third-quarter financial results (go here). From Chart 1 below, we can see that DIGI has made a lower 'low' and a lower 'high' (marked as b & b1 and a & a1, respectively). In addition, we can see that the 5-m SMA has cut below the 10-m SMA; the monthly MACD has hooked down; and, the William %R has similarly broken its uptrend as well as gone below the 50% level. This means that DIGI will be trending lower over the near term, with immediate support at RM20.00 & thereafter at RM18.80.


Chart 1: DIGI's monthly chart as at October 28, 2008 (source: Quickcharts)

Nestle's long-term uptrend line is still intact, as long as the share price remained above RM24.50-25.00. The stock, which closed at RM27.50 yesterday, has a fairly strong horizontal support is at RM26.00.


Chart 2: Nestle's monthly chart as at October 28, 2008 (source: Quickcharts)

Finally, BAT... Based on the long-term uptrend line drawn (which exclude the sharp price plunge of 1998), we can see that this uptrend line is still intact. It should provide support at RM37.50-38.00. The stock has a fairly strong horizontal support at RM38.50-39.00. BAT closed at RM42.00 yesterday.


Chart 3: BAT's monthly chart as at October 28, 2008 (source: Quickcharts)

In a bear market, everything will be sold down. It is only a matter how much they are sold down. We will wait & see whether BAT and Nestle will be able to stay above their long-term uptrend line.