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Wednesday, October 17, 2018

US Markets: More Than A Technical Rebound?

Yesterday, DJIA and S&P500 have both tested their long-term uptrend lines and rebounded. See Chart 1 & 2. Nasdaq has also rebounded but it is still below its uptrend line (see Chart3). Volumes traded were relatively thin. We will have to wait and see whether the rebound for DJIA and S&P500 will have follow-thru tonight, and await Nasdaq climbing back above its uptrend line.

Chart 1: DJIA's weekly chart as at Oct 16, 2018  (Source: Stockcharts.com) 

Chart 2: S&P500's weekly chart as at Oct 16, 2018  (Source: Stockcharts.com) 

Chart 3: Nasdaq's weekly chart as at Oct 16, 2018  (Source: Stockcharts.com)

When Heavyweights Dropped

Yesterday we saw a few heavyweights blue chip stocks dropping sharply. Where are the support and resistance and what are their near term outlook?

1. CARLSBG
    Support: RM17.30 (H) & RM16.00 (UPT)
    Resistance: RM18.80 (H) & RM20.00 (H)
    Outlook: Intermediate uptrend line, S1-S1 is still intact.


2. HEIM
    Support: RM17.60 (H) & RM16.40 (H)
    Resistance: RM19.000 (H) & RM20.00 (H)
    Outlook: Intermediate uptrend line, S1-S1 is broken. Long-term uptrend line, SS is intact.  


3. AJI
    Support: RM20.00 (H) & RM19.00 (H)
    Resistance: RM21.00 (H) & RM22.00 (H)
    Outlook: Intermediate uptrend line, S1-S1 broke in June. Sideways movement ahead. 


4. DLADY
    Support: RM63.00 (UPT)
    Outlook: Long-term uptrend line, SS is intact. 



5. F&N
    Support: RM36.00 (H) & RM33.00 (H)
    Resistance: RM38.00 (H) & RM40.00 (H)
    Outlook: Medium-term uptrend line, SS is broken. Sideways movement ahead. 



3. KESM
    Support: RM13.00 (H) & RM10.00 (H)
    Resistance: RM14.60 (H) & RM16.00 (H)
    Outlook: Intermediate uptrend line, SS is broken. Sideways ended. Downtrend has begun.

Tuesday, October 16, 2018

Market Outlook as at October 15, 2018

FBMKLCI is likely to have peaked at 1896 on 16 April. I plotted 3 moving average lines to give me a bearish cross-under. The 3 moving averages are 300-day (simple) moving average (MA), 150-day exponential moving average (EMA) and 100-day weighted moving average (WMA). The bearish cross-under is satisfied when the following occurred:
1) the 100-day WMA crossed below the 150-day EMA, and both of these crossed below the 300-day MA, and
2) the index crossed below all these 3 moving averages.

The last time we saw a similar cross-under was in 2015 (see the pink arrows). The index dropped and stabilized before it dropped again. After that, it moved sideways for about a year. We may or may not see something similar.

Chart 1: FBMKLCI's daily chart as at Oct 15, 2018 (Source: Malaysiastock.biz)

The next chart is a weekly chart which includes a line that's my own "invention". It is the blue line (denoted as 'AB') which acts as a support to the market. It is not an uptrend line- unlike the tentative uptrend line (in green & denoted as 'SS'). Our FBMKLCI is now resting on this support line, AB. The last time we broke below this line decisively was during the Global Financial Crisis of 2008. Given the sharp drop in a few emerging market currencies (including our neighbor, Indonesia), it is possible, not probable, that we could be in early day of another financial crisis. The oft-mentioned 10 or 12-year cycle is another theme that is being used to forewarn about an impending market selldown. Whatever it may be, if FBMKLCI were to go below its last week low of 1682, we could see a selldown more severe than what we saw in 2015. Stay tuned...

Chart 2: FBMKLCI's weekly chart as at Oct 15, 2018 (Source: Malaysiastock.biz)



Monday, October 15, 2018

US Markets: At A Critical Juncture

DJIA managed to recover last Friday to stay above its uptrend line (at 25300) as well as its 200-day EMA line (at 25000). See Chart 1. If it failed to stay above these critical levels (2500-25300), the uptrend for DJIA may be over and the index may move sideways like what it did from May 2015 to November 2016. See Chart 2.

Chart 1: DJIA's daily chart as at Oct 15, 2018_9.45am (Source: Stockcharts.com)

Chart 2: DJIA's weekly chart as at Oct 15, 2018_9.45am (Source: Stockcharts.com)

If we look at Nasdaq, we can see that this index has broken below its uptrend line (at 7700) as well as its 200-day EMA line (at 7450). It has been a few days since the breakdown occurred - which may confirm the end of the uptrend. See Chart 3. This could mean that Nasdaq index may move sideways like what it did from July 2015 to November 2016. See Chart 4.


Chart 3: Nasdaq's daily chart as at Oct 15, 2018_9.45am (Source: Stockcharts.com)


Chart 4: Nasdaq's weekly chart as at Oct 15, 2018_9.45am (Source: Stockcharts.com)

In the above scenario, I am assuming that sideways movement would follow after the end of an uptrend. That's a mild assumption. The bearish assumption would be for a market that has peaked, to go into a downtrend. At this moment, it is too early to call to make that call because we are not entirely sure the long-term uptrend is over yet. So, let's fasten the seat belt for we may have a bumpy ride ahead.

Topglov: Earnings Remained Healthy

Results Update

For QE31/8/2018, Topglov's net profit dropped 13.6% q-o-q but rose 3.0% y-o-y to RM102 million while revenue rose 10.6% q-o-q or 34.8% y-o-y to RM1,22 million. The q-o-q increase in revenue is attributed to sales volume grew 6% versus 3QFY18. The improved performance was attributed to improvements in higher gloves volume sold, production efficiency and quality, coupled with new capacity coming onstream and strong demand growth. However, Profit After Tax was softer, impacted by higher tax expense. The upward trend in nitrile latex prices compared with 3QFY18 also caused some pricing pressure. The average natural rubber latex price eased 2.7%, while the average nitrile latex price was on the uptrend, increasing by 13.9%.

 
Table: Topglov's last 8 quarterly results


Graph: Topglov's last 49 quarterly results

Financial Position

Topglov's financial position is deemed satisfactory with adequate current ratio at 1.15 times while gearing ratio is elevated at 1.18 times.

Valuation

Topglov (closed at RM10.78 last Friday) is now trading at a trailing PE of 31X (based on last 4 quarters' EPS of 34.40 sen). At this PER, Topglov is deemed fully valued.

Corporate Exercise 

Topglov has proposed a 1-for-1 bonus issue which will go ex on Oct 24.

Technical Outlook

Topglov has to surpass the July high of RM12.48 to regain its uptrend again. The sudden plunge from that recent high came about when it announced that its acquisition of Aspion Sdn Bhd from Adventa Capital Pte Ltd was based on misleading information, and that it would be taking legal action to recover the loss (here).


Chart 1: Topglov's weekly chart as at Oct 12, 2018 (Source: Malaysiastock.biz)


Chart 2: Topglov's monthly chart as at Oct 12, 2018 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance and an upcoming bonus issue, I think Topglov will likely to continue its uptrend. 

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Bursa Uni Day 2018


Bursa Malaysia will be holding Bursa Uni Day 2018 next weekend to help young Malaysian university students to find answers for all their questions about investing. The theme for this year Bursa Uni Day is "Invest Bursa, Invest in You".

This event is open to the public. Anyone, from young to old, can join this investment carnival.


On Bursa Uni Day, you can expect:
- Top notched industry experts to share their trading and investment experiences with you
- Understand more about the possible careers in the capital market
- Exhibition and game booths for you to explore and learn while having fun!
- Watch the finale of the Bursa Malaysia National Investment Debate Challenge by our BYIC students!
- Meet famous celebrity emcee and a mysterious performance by a hypnotist and mentalist!
- Stand a chance to win amazing lucky draw prizes!
- Delicious food by our hand-picked food trucks

Event Details:
Date: 20th October 2018
Time: 9am – 5pm (Registration starts at 8am)
Venue: Monash University Malaysia Campus
Registration: http://mylifechamp.com/bursauniday2018
Register now for Bursa Uni Day and enjoy a full day of edutainment at absolutely no-charge! Hurry up, while the FREE seats still last.

Friday, October 12, 2018

Dow Jones Broke Its Uptrend Line

Yesterday DJIA broke its long-term uptrend line at 25200. If there is no recovery, DJIA will follow Nasdaq which broke its uptrend line at 7700 on October 9. 


Chart 1: DJIA's weekly chart as at Oct 11, 2018 (Source: Stockcharts.com)


Chart 2: Nasdaq's weekly chart as at Oct 11, 2018 (Source: Stockcharts.com)

We have to wait and see whether US markets can stabilize next week or go down further.


Thursday, October 11, 2018

Gamuda: Time to Smoke the Peace Pipe!

Despite the 800 plus point drop on Wall Street overnight, our investors and punters will be glued onto Gamuda for the next few days. After 2 days of drum beating, senses have now begun to prevailed. The Prime Minister has indicated that the Government shall review the cancellation of the MRT2 Underground Contract that was being undertaken by MMC Gamuda.MMC Gamuda said that it would adopt an open book approach - which it refused to do previously - provided the review is undertaken by an international engineering consulting firm and its Intellect Property (IP) rights and commercially sensitive  information are respected.

If this review can break the deadlock and lead to cost-saving as well as MMC Gamuda remaining as the contractor, then the win-win solution has been achieved. Obviously the Government must not appear soft in this review and negotiation because we would be sending the wrong signals to other parties with whom the Government will negotiate next- such as the Chinese parties undertaking the ECRL project or the Singapore Government in the HSR project.

Meanwhile, Gamuda looks much more attractive after the big drop. It is now resting on the horizontal line at RM2.00. This could be a good entry to the best construction company in Malaysia.


Chart 1: Gamuda's monthly chart as at Oct 10, 2018 (Source: Malaysiastock.biz)

The second largest construction company, IJM has also dropped to a very attractive level of around RM1.40. Like Gamuda, this stock should have good support at the horizontal line of RM1.35, thus presenting a good entry to the stock.

Chart 2: IJM's monthly chart as at Oct 10, 2018 (Source: Malaysiastock.biz)

Given the big fall in US and the challenging fiscal position of our Government, I expect the near term outlook for our market to be weak. However the sharp drop in Gamuda and IJM gives us an opportunity to buy into these stocks at attractive price level. If you are a long-term investor, this opportunity should not be missed. Good luck!

Wednesday, October 10, 2018

Market Outlook as at October 10, 2018

On October 7, the market was shocked by the surprising news of the termination of MRT2 underground job. While the latest cost-saving effort is similar to the reduction in the scope of work and the contract value for LRT3, which was announced in July, the timing of its announcement less than 1 month before the reading of the 2019 Budget on November 2 (here) gave away the likelihood that this budget will not come with goodies for Malaysians. This will be a very tough budget. To underline the difficulty, the PM has even announced that the Government may have to impose new taxes or sell off some assets to pay down the debts (here). 

These announcements will cause much anxiety in the market, and if left unguided, it will lead to market selldown. The chart for FBMKLCI shows that the index is now precariously resting on the "horizontal line" at 1770. A breakdown of this support will send the index to the May low of 1710 or even to re-test the June low of 1660.


Chart: FBMKLCI's daily chart as at Oct 9, 2018 (Source: Malaysiastock.biz)

Given the challenging market ahead, investors and traders must re-look their portfolio and reduce their position to cushion against the storm ahead. Good luck!

Friday, October 05, 2018

PMETAL: What's Up?

Yesterday PMetal broke above the horizontal line at RM5.00. This bullish breakout could send the share price higher to challenge the horizontal lines at RM5.20 or RM5.35 or even the all-time high at RM5.75. What could possibly explain the surge in the share price for PMetal?


Chart 1: PMETAL's daily chart as at Oct 4, 2018 (Source: Malaysiastock.biz)

For answer, you have to look at the price of aluminium. This metal surged on October 3 to a high of USD 2237. Yesterday, it went up further to an intraday high of USD2266 before correcting back to close at USD2170. The chart shows that aluminum has tested the line connecting the peaks for the past 9 months and corrected back. I believe the metal is likely to continue to correct for the next few days or weeks.


Chart 2: Aluminum daily chart as at Oct 4, 2018 (Source: Investing.com)

Based on the above, I believe that it is a good time to take some profit on PMETAL as well as other aluminium stocks (especially ALCOM). Good luck!

AEONCR: Earning Dropped!

Result Update

For QE31/8/2018, AEONCR's net profit dropped 18.7% q-o-q but rose 13.0% y-o-y to RM80.6 million while revenue rose 2.3% q-o-q or 7.0% y-o-y to RM333 million. Pre-tax profit dropped 18.6% mainly due to higher impairment loss on financing receivables of RM95.263 million for the current quarter as compared to RM57.096 million for QE31/5/2018.


Table: AEONCR's last 8 quarterly results


Graph: AEONCR's last 45 quarterly results

Valuation

AEONCR (closed at RM15.86 yesterday) is now trading at a PE of 12.2 times (based on last 4 quarters' EPS of 130.19 sen). At this PER, AEONCR is deemed fairly attractive. In addition, it pays a decent dividend with DY of 2.7% (based on last year dividend of  42.25 sen).

Technical Outlook

In May, AEONCR broke above its November 2017 high of RM14.40. Since then, it has slowly climbed to a new all-time high of RM16.46 on September 27. Given the break in the steady profit growth, AEONCR share price is likely to drop back significantly for the next few days. Its immediate support at the horizontal line of RM15.00 may be violated. It may even test the next support at the horizontal line of RM14.40.


Chart 1: AEONCR's daily chart as at Oct 4, 2018 (Source: Malaysiastock.biz)


Chart 2: AEONCR's weekly chart as at Oct 4, 2018 (Source: Malaysiastock.biz)

Conclusion

Despite the surprising decline in its financial performance, AEONCR is still a good stock for long-term investment in view of its fairly attractive valuation and still positive technical outlook. However, the share price will be weak for the next few days or weeks. Any buying should be carried out slowly and with long-term horizon in mind. Good luck!

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.