Commerz tested its long-term uptrend

Commerz has just rebounded off its long-term uptrend line support at RM5.70. This stock has been sliding since making its top at RM12.60 in May 2007. Its recent low was only RM5.65, recorded 2 days ago.

Commerz (closed at RM5.80 yesterday) is now trading at a Price-to-Book of 1.03 times (based on its NTA of RM4.68 as at 30/6/2008). For the 6-month ended 30/6/2008, Commerz reported an earning of 35 sen per share. Assuming a 30% lower earning for the 2rd half, Commerz's earning for FY2008 could be about 60 sen. Thus, the stock is trading at about 10 times its current year's earning.

Technically speaking, Commerz is still in a long-term uptrend, with support at RM5.70. I have fitted in a 30-month SMA as well as 2 displaced SMAs (i.e. +30% & -30%), trying to best-fit the trend of Commerz's share price movement. As you can see from the chart, the stock tends to find support at the -30% displaced 30-month SMA, only failing to do so in 1998. Similarly, the stock's upside has been capped by the +30% displaced 30-month SMA for long period, except for 1999, 2000 & 2007. I believe that Commerz is likely to recover further, having tested its long-term uptrend line plus the -30% displaced 30-month SMA support at about RM5.70-6.00 level. On the other hand, a convincing break below this level would signal a sell on this stock.


Chart: Commerz's monthly chart as at October 29, 2008 (source: Quickcharts)

Based on attractive valuation & strong technical support, Commerz could be a good stock for medium-term investment.