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Monday, June 25, 2012

Tenaga may have a bullish breakout


With the FBMKLCI making new high, we should look at blue chips that may continue to rise; thus giving support to the rising FBMKLCI. We have seen TM making new high in this cycle. This morning, it is the turn for Tenaga to charge.

Tenaga broke above its horizontal line, R2-R2 at RM6.70. It may rise to test the resistance of its uptrend channel line at RM7.20-7.30. Note that there is some resistance at the horizontal line at RM7.10.


Chart 1: Tenaga's daily chart as at June 25, 2012_11.00am (Source: Tradesignum)

Tenaga is coming into a positive news cycle, which will likely to coem from two sources:
1. The renegotiation of the old Power Purchase Agreements (PPAs) with Independent Power Producers (IPPs) which could lead to a significant reduction in its operating costs; and
2. Increased in power consumption.

Another catalyst for a re-rating of Tenaga is the correction in the prices of its fuel. We can see from Chart 2 & 3 that the price of Natural Gas & Coal (Australia) have eased off. Cheaper prices of Natural Gasmay not benefit Tenaga signififcantly for now as its purchases from Petronas Gas is subsidized currently. In 2016 onwards, the price of Natural Gas would be at market rate & any downward pressure on Natural Gas is a positive development for Tenaga.


Chart 2: Natural Gas price chart as at May 2012 (Source: mongabay.com)


Chart 3: Coal (Australia) price chart as at May 2012 (Source: mongabay.com)

If you look at the monthly chart for Tenaga, you will see that Tenaga is once again testing the 3rd fan downtrend line (R-R3) at RM6.70. The last time, it broke above a 3rd fan downtrend line (r-r3) was in 2006 when it rose to a high of about RM10.00. If Tenaga can break above the RM6.70 resistance (preferably RM7.00 as well), it may swing up & revisit the RM10.00 mark. My most optimistic forecast is that it may hit RM12.00 within a 1-year period, based strictly on technical projection.


Chart 4: Tenaga's monthly chart as at June 22, 2012 (Source: Tradesignum)

Based on the above, Tenaga could be a trading BUY or even a medium-term trade if it can break above the RM6.70 mark convincingly.

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