Measat- shooting for the stars?

A reader (Kenny) asked for my comment on Measat on March 17 (see the post). This was my reply on the same day:

Measat has broken above its medium-term downtrend line at about RM2.20-25 this morning. I saw the upside breakout but I did not post on it because Measat seems to rally every time Astro was suspended. After the false upside move, the stock would enter into a correction. Hopefully, this time it is really different. Its overhead resistance is at the psychological RM2.50 and thereafter at RM2.60-65 & then at RM2.90-95.

After the announcement of the Astro privatization, one would think that investors would give up on the idea of a Measat privatization coming so close on the heel of the Astro announcement. Apparently not. The more Measat share price rises, the more appealing the idea of a privatization becomes. Skeptics (you may count me as one) are now in hiding. This is a party for the believers!!!

Technically speaking, Measat has broken above the strong horizontal resistance at RM3.00. The next resistance is near the RM4.00 level. See the two charts below. Chart 1 is plotted on arithmetic/linear scale while Chart 2 is plotted on logarithmic scale. Chart 2 gives a better fit on the downtrend line breakout.


Chart 1: Measat's weekly chart (on linear scale) as at Mar 22, 2010 (Source: Tradesignum)


Chart 2: Measat's weekly chart (on logarithmic scale) as at Mar 22, 2010 (Source: Tradesignum)

The big question is whether one should get onto this train. That's a million dollar question which I can't answer for you. You have to ask yourself: Should I believe my eyes or should I rely on my head? If you choose to go in, go in with your eyes wide open. Set your protective stop!

Note: Measat is a communications satellite operator. For FYE31/12/2009, it reported a pre-tax profit of RM53.2 million on the back of a turnover of RM242 million. This was a turnaround from a pre-tax loss of RM37.4 million on a turnover of RM196 million achieved in the previous year.