Monday, November 05, 2012

Telcos- under selling pressure

Last Friday, TM, Axiata & Digi dropped sharply. Digi dropped from RM5.33 to RM5.14 while TM dropped from RM5.93 to RM5.67. Axiata gapped down when it opened at RM6.40 from Thursday close of RM6.48 & lost 32 sen on Friday to close at RM6.16. Meanwhile, Maxis also dropped from RM6.97 to RM6.92.

TM has clearly broken its uptrend, if we use either the 50 or 100-day EMA line as the trend line. Axiata is on the verge of breaking its uptrend line, as it is now below its 50-day EMA line but still above its 100-day EMA line. Digi is resting on its 50-day EMA line.

This sharp drop in 3 of the biggest telcos signals the correction for the sector, which had enjoyed a good run for the past 1 year. The immediate support for Axiata, Digi & Maxis are RM6.15, RM5.00 & RM6.70. TM, which has broken its uptrend line as well as its strong horizontal line at RM5.80, must stage a good rebound soon- possibly from the psychological RM5.50 mark.

Those who are looking to buy on this correction, can consider entry at the immediate support level, with the exception being TM. That stock broke its uptrend and the RM5.50 psychological level may not be a good support. Since all these stocks had rallied substantially over the past 1 year, this correction may last for a while. So, buying if any should be gradual, not aggressive.

Chart 1: TM's daily chart as at Nov 2, 2012 (Source: Quickcharts)

Chart 2: Axiatas daily chart as at Nov 2, 2012 (Source: Quickcharts)

Chart 3: Digi's daily chart as at Nov 2, 2012 (Source: Quickcharts)

Chart 4: Maxis's daily chart as at Nov 2, 2012 (Source: Quickcharts)

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, TM, Axiata, Digi & Maxis.


Mat Cendana said...

These telcos have performed very well over the past months as compared to most other counters. They have become expensive and it's about time they undergo a correction to make them attractive again. But I don't feel they are cheap enough yet.

I remember Digi being at 4.01 some months ago after a foreign institution had trimmed its portfolio. Then it was hovering around 4.10 for some time before going up and up.

This is one of my biggest regrets this year - could easily have gotten it at 4.05 but didn't since I was waiting for it to go below 4.00. The same with Axiata when it was at 5.20 in April. This will serve as a lesson for me in the future - when a quality counter goes down to a certain level, just buy it and wait. Or, at the very least, get some of its call warrants.

Alex Lu said...

Hi Mat Cendana,

The corrections in telcos and the consumer staples are the same. The end customers are consumers. This could be the end of the play on the consumer theme play. If so, two things can happen. The funds would migrate to the other sectors that have been ignored, such as construction or this could be the end of the great rally of 2009-2012. The jury is still out but my guess is the former scenario is more likely as the fund flow from all the quantitative easing will push the market back up.

Sarah said...

Hi Alex,

I bought Digi 5.03, holding until now, any advice on this share ? Thanks

Alex Lu said...

Hi Sarah

Digi's immediate support is at RM4.70. I think that support should hold for now. In the event that it fails, the next support is at RM4.00. The RM4.00 mark is an unlikely price for now.

Mat Cendana said...

You are right about TM especially. Had wanted to buy last week when it looked `attractive'. However, my mind was on this post so I decided to wait and see first, especially since there were interruptions to this week's trading. TM went as low as 5.38 today before rebounding a bit. I'm wondering whether this might be a good time to buy. Or is further correction likely?