Friday, March 02, 2012

Litrak- ready for take-off?

Litrak broke above its horizontal resistance at RM3.80 in January. Last week, The Edge newsletter reported that PLUS is keen to buy over Litrak. This report gave an impetus for the stock to rally above the psychological RM4.00 mark on Monday (see Chart 1).

CIMB has issued a research report on this surprising 'news' and it has valued Litrak at RM4.45 (here). CIMB prefers Gamuda, the major shareholder of Litrak, to Litrak if one wants to play the news on the sale of Litrak.

From the Chart 2, we can see that Litrak has risen substantially over the past 3 years. The breakout above an important psychological level; the setting of a new all-time high; and, rumor of a buyout could propel the stock into an exponential rise, known as the blowout stage. While the volume traded has not been impressive, that may not be a critical criteria for a blowout in the share price. If you look at how much some blue chips such as GAB, Carlsbg & DLady - or even second-tier stocks such as Kassets or AEONCR- have risen over the past few weeks or months on relatively thin volume, then one can make a case that the same could happen to Litrak.

Based on the above, Litrak could be a good trading BUY.

Chart 1: Litrak's daily chart as at Mar 2, 2012 (Source: quickcharts)

Chart 2: Litrak's monthly chart as at Feb 27 2012 (Source: Tradesignum)

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