Kencana- a Trading Idea

The next trading oil for the Oil Services sector is Kencana. Its results for 1Q2009 ended 31/10/2008 shows the net profit has increased by 41.4% q-o-q or 83.5% y-o-y to RM33.1 million. Its turnover is only 3.5% higher than the preceding quarter, but 35.7% lower than the turnover of the previous corresponding quarter. The company attributed its higher net profit to higher profit margin.



Kencana is poised to test its medium-term downtrend line resistance at RM1.53-55 level. A break above this downtrend line, together with the 20-day EMA crossing above the 60-day EMA, could signal the beginning of a decent rally for Kencana. With the 200-day SMA flattening out, the downside for Kencana is likely to be limited.


Chart: Kencana & OSX's daily chart as at Jan 9, 2009 (source: Tradesignum.com & Stockcharts.com)

Based on the above, Kencana could be another good proxy for a play on a reversal in Crude Oil prices. Good entry level for this stock is at RM1.30-35.