Wednesday, March 17, 2010

USD index to test its 50-day SMA line soon

Lately, the USD has eased off a bit. From Chart 1, we can see that USD index may pull back to the 50-day SMA line at 79.31. In the previous sharp rally for USD index from July 2008 to March 2009, we also witnessed a correction where USD index pulled back to the 50-day SMA line before rallying further (see the pick boxes).


Chart 1: USD's daily chart as at Mar 16, 2010 (Source: Stockcharts.com)

For the USD-RM exchange rate, we can see that the strengthening of the USD has caused the USD-RM exchange rate to break above the downtrend line in late January this year. Subsequent correction has pushed back the USD to below the downtrend line again, where an expanding triangle can be seen. USD-RM has just rebounded off the support of that triangle & it is expected to rise within the next few days to re-test the downtrend line resistance at 3.40. An upside breakout of both the downtrend line (at 3.40) & the expanding triangle (at 3.48) could then signal an uptrend for USD-RM.


Chart 2: USD-RM's daily chart as at Mar 16, 2010 (Source: Yahoo Finance)

What could be the catalysts for a strengthening in the USD index? Could it be due to simmering worries about the issue of sovereign risk, particularly in Europe? Or, could it be the re-deployment of funds away from the commodities complex (due to possible soft-landing in an overheated China) which has always been a play on a weakening USD? We can see from Chart 3 below that CRB has broken below its uptrend line in January this year, which coincided with Shanghai's SSEC index breaking below its uptrend line (see Chart 4).


Chart 3: CRB's daily chart as at Mar 15, 2010 (Source: Stockcharts.com)


Chart 4: SSEC's daily chart as at Mar 15, 2010 (Source: Stockcharts.com)

From what we had seen in January this year, we can expect that a continuation of the rally in USD could lead to sharp corrections in commodity as well as equity markets.
at

14 comments:

  1. UnknownWednesday, March 17, 2010 3:50:00 PM

    Hi Alex ,

    Please advice any share to pick up?

    ReplyDelete
  2. MaxWealth88Wednesday, March 17, 2010 4:05:00 PM

    hi Alex,

    how about Hexagon? notice it's at year low. i remember this used to be good stock.

    thanks
    cltee

    ReplyDelete
  3. MaxWealth88Wednesday, March 17, 2010 4:31:00 PM

    hi alex,

    could you also pls comment on Rexit?

    thanks
    cltee

    ReplyDelete
  4. cheerWednesday, March 17, 2010 10:21:00 PM

    Do u think HIL worth to buy for short term?

    ReplyDelete
  5. solomonWednesday, March 17, 2010 10:28:00 PM

    Some punters in the market again?? They have make some decent returns on MAS, MEASAT and Mitra.....

    What do you think on Sarawak election counter like SCIB or even O&G counter like Petra?

    ReplyDelete
  6. AllyThursday, March 18, 2010 9:46:00 AM

    Hi Alex,

    Can you explain on 50-day SMA line?
    Thanks.

    ReplyDelete
  7. HengThursday, March 18, 2010 9:59:00 AM

    Hi Alex,
    Good day!

    Please advice on MSC share.
    Is it a good share to HOLD for long-term? [MSC making a huge loss]

    ReplyDelete
  8. Alex LuThursday, March 18, 2010 11:52:00 AM

    Hi phkoay,

    I'm afraid you have to slowly sift through some of my stock recommendations in order to pick up some that may suit your risk profile. As you can see, some of my recommendations are for trading purposes, while others are for long-term investment.

    ReplyDelete
  9. Alex LuThursday, March 18, 2010 12:27:00 PM

    Hi Maxwealth88,

    Hexagon has dropped from RM2.30in Dec 2007 to less than RM0.80 now. It has incurred a net loss of RM7.6 million for QE31/12/2009 to "delay in work-in-progress by clients" & project deferment. Hexagon's financial position is precarious with high gearing of 2 times. While current ratio appears adequate at 1.2 times, the high debtors' collection period of 247 days & inventory turnover period of 274 days are worrying signs that the company may face problem converting its current assets to cash.

    Hexagon is in a downtrend. It has just broken below the horizontal support of RM0.80, which is a big negative for the stock.

    Based on poor financial performance, weak financial position & negative technical outlook, Hexagon is a SELL.

    ReplyDelete
  10. Alex LuThursday, March 18, 2010 12:37:00 PM

    Hi Maxwealth88,

    Rexit is facing a credibility problem since its Japanese partner, Marubeni disposed of 18.93 million shares, or its entire 10% stake in Rexit. For 1H2010 ended 31/12/2009, Rexit reported an unchanged net profit of RM3.3 million on the back of a 20%-decline in turnover.

    Rexit will have support at the psychological RM0.50 level as well as the horizontal support of RM0.45-46.

    With each passing days, Rexit appears more & more like a case of "failure to launch". This perception will keep the share price glued to the RM0.50 level until something happens.

    ReplyDelete
  11. Alex LuThursday, March 18, 2010 1:05:00 PM

    Hi Cheer,

    Hor FYE31/12/2009, HIL reported a net profit of RM36 million on sale of RM162 million. As such, HIL (closed at RM0.905 yesterday) is now trading at a PER of 7 times (its EPS of 13 sen), which is undemanding.

    Chartwise, it has surpassed its strong horizontal resistance of RM0.80. It is pushing again a rising 'horizontal line', connecting the high of 2000 & 2003, which is acting as a resistance at RM0.95. A break above this level & the psychological RM1.00 level could send the stock to the next resistance at RM1.20.

    I think HIL could be a good stock for medium-term investment. Look out for the good support at RM0.80-82 for potential entry level.

    ReplyDelete
  12. Alex LuThursday, March 18, 2010 1:09:00 PM

    Hi Solomon,

    I haven't addressed my mind to a possible theme play based on the Sarawak election. However, some Sarawak stocks, especially those well-connected companies (such as CMSB), are already inching up. Even some timber stocks are slowly lumbering off the starting block. I will try to screen for such stocks & if the technical set-up is right, I will make the call.

    ReplyDelete
  13. Alex LuThursday, March 18, 2010 1:16:00 PM

    Hi Ally,

    Moving average as a technical tool is under-appreciated. It can be used as a 'trend line' which lies just below the share price in the case of a rising stock or above the share price in the case of a declining stock. It also acts as support/resistance for the stock for which traders may enter the buy/sell order. Finally, a combination of 2 or 3 moving average lines can be used to trigger buy/sell signal. For more on these, see the link below.

    http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:moving_averages

    ReplyDelete
  14. Alex LuThursday, March 18, 2010 1:34:00 PM

    Hi Heng,

    MSC has dropped off quite badly in the past few weeks. This was brought on by a 'poor' set of results and a break in the uptrend for tin prices.

    The 'poor' results was for QE31/12/2009, where MSC recorded a pre-tax profit of RM25 million but a net loss of RM2.8 million. This was attributable to additional provision made as a results of a decision by a foreign tax authority in disallowing certain expenses to be set off against prior years' taxable profit as well as losses incurred by some subsidiaries cannot be off-set against taxable profit of other subsidiaries.

    The volatility in the prices of tin- ranging from USD15k to USD18k per tonne- has affected investors' confidence in the financial performance of MSC.

    Technically speaking, I believe MSC should have good support at RM3.00-3.10. A break below RM3.00 would be very negative for this stock.

    ReplyDelete