Tuesday, May 09, 2017
Harta: Bullish Breakout
In the past few weeks, I have noticed the steady decline in the share prices of Kossan & Topglov. I attribute the weakness in the share price to the strengthening of our MYR. Exporters receiving foreign currency proceed will be getting proceed in MYR. If they can sell forward in the past to protect their revenue (and assured themselves of their profit), this safeguard was withdrawn by BNM a few weeks ago. Hence. exporters are losing out as our MYR strengthens. All's fair in business & economy; what goes up must comes down!!
Chart 1: Kossan's daily chart as at May 9, 2017_11.45 (Source: Malaysiastock.biz)
Chart 2: Topglov's daily chart as at May 9, 2017_11.45 (Source: Malaysiastock.biz)
Strangely, Harta was able to maintain its share price at RM4.80-4.90 while Kossan & Topglov were sliding during that period. I noted the anomaly but did nothing about it. Yesterday Harta broke above the RM5.00 psychological after Kossan & Harta had a strong rebound over the past 2 days.
Chart 3: Harta's daily chart as at May 9, 2017_11.45 (Source: Malaysiastock.biz)
Today we are faced with the age-old dilemma in the stock market: Do you buy a stock that has declined or one had a bullish breakout? If we rephrase that choice between buying a cheaper stock versus a pricey stock, the answer is obvious! However, we "koew" why Kossan & Topglov dropped earlier but we don't know why Harta didn't drop. We "know" why Kossan & Topglov are rebounding but we don't know why Harta is breaking out to the upside. Again, we tend to go with what we know (or think we know). Thus, the choice is obvious. If you have been in the market long enough, and have a memory of an elephant, you will know that if you can't invest based on the obvious case.
My choice is to go with technical analysis. I will choose Harta for a bullish breakout, and to avoid Kossan & Topglov as their prices are in an intermediate downtrend. Good luck!