Thursday, November 08, 2012

Consumer stocks selldown continued

The correction in the market is starting to broaden out, but most of the big losers are blue chip stocks. This is revealed by looking at the performance of the second liners as reflected by FBM70 index which hasn't dropped much. See Chart 1 below.

Chart 1: FBM70's daily chart as at Nov 7, 2012_12.30pm (Source: Quickcharts)

The losers now were the market leaders for the past few months. This is especially prevalent among the high price consumer stocks. When we talk about consumer stocks, we tend to think of companies that sell consumer goods but consumers also spend on services. So, the out-performance of telcos and consumer staples are attributable to the same theme play. Now, we are seeing sell-down or profit-taking in these sectors.

We can see that consumer index lost about 5%, from 550 to 524 over the past 7 days. The immediate support is the intermediate uptrend line at 525 while the next support will be the horizontal line at 515 (see Chart 2). If these two supports are violated, the index may test the horizontal line at 480 or the long-term uptrend line at 475 (see Chart 3).

My concern is that the Consumer index has put in a top and this correction could be a double top reversal. In such a scenario, the Consumer index could enter into a downtrend. Since the Consumer index is now at 525, there is a possibility of a rebound from here. Let's wait & see.

Chart 2: Consumer's daily chart as at Nov 7, 2012_12.30pm (Source: Quickcharts)

Chart 3: Consumer's weekly chart as at Nov 7, 2012_12.30pm (Source: Quickcharts)

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