Monday, March 15, 2010

Market Outlook as at March 15, 2010

The FBM-KLCI failed to surpass the resistance posed by the expanding triangle ('ABCD') at 1325-30. The ensuing correction over the past 3 days has been fairly sharp. In fact, when we look at the current bull market which started in March last year, there were only 4 occasions when the market underwent a correction as severe as the current one. They are the correction lasting 3/4 days that started on April 27 & August 17 last year and the market consolidation lasting about 3 weeks that started on June 16 last year & January 22 this year. I believe the current sharp correction falls under the category of correction lasting a few days, which in the past two incidences has found support at the 20-day SMA line. If the same were to recur this time, then we can expect FBM-KLCI to find support at about 1292 level.

However, one would note that the close of FBM-KLCI today (at 1299.67) is fairly bearish as it has broken below the resistance-turned-support of 1308 (accorded by the high recorded on January 21 this year) and the psychological 1300 level (albeit only marginally). Besides the support from the 20-day SMA line, the FBM-KLCI may find support at the resistance-turned-support of 1288 (accorded by the high recorded on November 17 last year) as well as support from the 50-day & 100-day SMA lines at 1280 & 1259, respectively.


Chart: FBM-KLCI's daily chart as at Mar 15, 2010 (Source: Quickcharts)

I believe the current sharp correction (with a loss of about 30-35 points) may not appear too excessive when one consider the prior sharp gain (of about 100 points from February 9 to March 13). The market could have been shaken by comment from BNM that further interest rate hikes is possible after its recent 25-basis-point hike.
at

17 comments:

  1. Mother of TwoMonday, March 15, 2010 8:46:00 PM

    Hi Alex,
    Would you please comment on Dolomite? Can I buy at this price 40.5sen? Thank you.
    Grace

    ReplyDelete
  2. cheerMonday, March 15, 2010 9:39:00 PM

    WThorse and KimHin, which one is safer to pick?

    ReplyDelete
  3. TXAMonday, March 15, 2010 9:43:00 PM

    Hello Alex,

    Any idea on Rcecap? Is there any potential in this stock rising in the near future since it's been hovering ard 65-70 cents +- for quite a while. Should I hold longer or look for other more potential stock?

    Thanks for ur comments.

    ReplyDelete
  4. Alex LuTuesday, March 16, 2010 9:57:00 AM

    Hi High Society,

    Dolomite is a loss-making company, which incurred a net loss of RM27 million for FYE31/12/2009- an increase from a net loss of RM11 million in the previous year. In fact, Dolomite has been losing moneys since FYE31/12/2005.

    Chartwise, it has broken above the horizontal resistance at RM0.36. It is now pushing against the strong resistance of RM0.42. The next resistance is at RM0.55.

    What could investors find attractive about a stock with a 5-year track record for losing money?

    ReplyDelete
  5. Alex LuTuesday, March 16, 2010 10:12:00 AM

    Hi Cheer,

    WTHorse & KimHin recorded EPS of 26 sen & 16 sen, respectively for FYE31/12/2009. Based on yesterday's closing price, WTHorse (closed at RM1.43) & KimHin (closed at RM1.23) are now trading st PER of 5.5 times & 7.7 times respectively. In term of financial position, both companies have strong liquidity position & low gearing or negligible leverage.

    WTHorse has good support at RM1.37-40. A break above RM1.43-45 could be the start of its next upleg, with the first strong horizontal resistance at RM1.70-80.

    KimHin has good support at RM1.18-20. A break above RM1.30 could be the start of its next upleg, with the first strong horizontal resistance at RM1.50-60.

    I prefer WTHorse tp KimHin due to lower PER.

    ReplyDelete
  6. Alex LuTuesday, March 16, 2010 10:32:00 AM

    Hi TXA,

    For 9-month ended 31/12/2009, RCECap's net profit increased to RM58.3 million from RM48.0 million previously. This is on the back of a 20%-increase in turnover from RM157.4 million to RM190.0 million. 9-month EPS was 7.8 sen, or annualized full-year EPS of 10.4 sen. This means that RCECap is now trading at a PER of 6.3 times, which is quite attractive.

    Chartwise, the stock has been moving sideway between RM0.62 & RM0.72. Until a breakout happens, the stock will be range-bound. If you wish to reduce your position in this stock, you may do so when the stock approaches the RM0.72 level.

    ReplyDelete
  7. cheerTuesday, March 16, 2010 10:49:00 AM

    Thanks Alex on your comment for both WTHorse and KimHin. With the market outlook Mar 15 2010, what are your advices to investors in choosing a stock ?

    ReplyDelete
  8. jamesTuesday, March 16, 2010 11:14:00 AM

    Hi Alex,

    Can you share your thoughts on Mitrajaya and its price objectives?

    Thanks,
    James

    ReplyDelete
  9. Alex LuTuesday, March 16, 2010 1:12:00 PM

    Hi James,

    Mitrajaya is a medium-size property developer & construction company. It did very well in the last 2 quarters. As a result, it reported net profit of RM20 million for each of the past two quarters. For FYE31/12/2009, its net profit soared by 16 folds from RM2.3 million to RM41 million, while turnover increased by 67% from RM195 million to RM326 million. With FY2009 EPS of 33 sen, Mitrajaya (at RM0.945 yesterday) is now trading at an undemanding PER of 2.9 times only.

    Its immediate strong resistance is at RM1.00 while its immediate strong support is at RM0.80.

    ReplyDelete
  10. solomonTuesday, March 16, 2010 1:13:00 PM

    Good day Alex,

    What is the price perspective for Zelan? TQ.

    ReplyDelete
  11. UnknownTuesday, March 16, 2010 1:33:00 PM

    Hi Alex,

    What your comment about Lityan,what is the support line ,and how about L&G ?

    ReplyDelete
  12. UnknownTuesday, March 16, 2010 1:34:00 PM

    Hi Alex ,

    Would you please comment Lityan and L&G,which price can I buy?which is better?

    ReplyDelete
  13. Alex LuTuesday, March 16, 2010 4:25:00 PM

    Hi solomon,

    Zelan is still in a downtrend, despite the recent rebound off the low of RM0.495 on March 4, 2010. The stock may test the low of about RM0.45 recorded in March last year. That level could provide temporary support & possibly a rebound for the stock but it maybe a better idea to wait for a reversal to appear before making an entry. Below that, the stock may find support at the low of RM0.35 recorded in 1997 & 2003.

    For the 9-month ended 31/12/2009, Zelan reported a net loss of RM70 million on turnover of RM969 million. For the same period last year, it incurred a net loss of about RM80 million on turnover of RM1.48 billion. Its liquidity position is fairly tight with current ratio at 0.9 time but leverage position is low at 0.4 time.

    Being a 39%-owned associate of MMCCorp, Zelan is not expected to succumb to financial difficulties that happened to stocks trading at such low level. However, when will Zelan pull out of its current spate of poor performance is another matter. Until that happens, the share price may continue to trade at the current depressed level for a while.

    ReplyDelete
  14. Alex LuTuesday, March 16, 2010 4:50:00 PM

    Hi phkoay,

    L&G is still in a medium-term uptrend, with support at about RM0.40-44. Lityan continued to slide with no sign of rebound.

    Lityan is a desperate salvage operation by Tabung Haji for an investment that failed long ago. Lityan is nothing more than the former IT service provider for Tabung Haji. Can this smallish outfit (at best, a profit center) shoulder the responsibility of delivering results for an entire company with paid-up share capital of RM63 million? See my earlier post on Lityan below.

    On the other hand, L&G is on the last leg of its restructuring scheme. It will be implementing its 'painless' capital reduction where the par value will be reduced from RM1.00 to 20 sen, but the outstanding shares held by shareholders will remain unchanged. When compared to either its par value of 20 sen or its NTA per share of 37 sen, one would get a rough idea that L&G's upside is pretty limited.

    I think it is best that we avoid L&G & Lityan.

    http://nexttrade.blogspot.com/2009/11/lityan-rising-on-hot-air.html

    ReplyDelete
  15. yumiWednesday, March 17, 2010 10:18:00 AM

    Dear Alex,

    Last month we went to the seminar about market outlook and one of the securities remisier strongly recomend to buy KURASIA.

    By the time the stock was RM0.63 and now it went all the way down to RM0.53...huh..izit the right time now Alex or wait for the next support at RM0.43.

    Thanks for your time!

    ReplyDelete
  16. UnknownWednesday, March 17, 2010 10:47:00 AM

    Hi Alex ,

    Thanks for your advice,any good comment which share to pick up?

    ReplyDelete
  17. kayrollThursday, March 18, 2010 12:20:00 AM

    Alex,

    on MITRA, where did the cash go while having relatively 2 quarter of enormous earning ???

    ReplyDelete