Friday, December 03, 2010

Market Outlook as at December 3, 2010

November 2010 would be remembered for all economic uncertainties & political problems that have cropped up. Despite all these problems, the global stock markets were fairly resilient. After a strong rally which started in March 2009, some (like me) thought that the market would consolidate or even enter into a deep correction. We were proven wrong.

From the chart below, we can see that our FBM-KLCI has only pulled back to its medium-term uptrend line. At the lowest point on November 29, the index tested the uptrend line support at 1174. Yesterday, it rebounded strongly & broke above its short-term downtrend line at 1490. With this upside breakout, the market may again be continuing on its prior uptrend.


Chart: FBM-KLCI's daiky chart as at Dec 2, 2010 (Source: Tradesignum)

Based on the above positive (& potentially bullish) technical outlook, we can adopt a more constructive stance by buying into stocks which have corrected back sharply.
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2 comments:

  1. AlexPFriday, December 03, 2010 1:44:00 PM

    Hi Alex,
    Could you take a look at BP Plastic Holdings (BPPLAS)? It's latest results was decent, and balance sheet shows zero debt with a good NTA discount. Yet the stock is still trading close to its 52 week low. The company just announced its plan to go into an aggriculture investment in Cambodia. Is the low valuation perhaps reflecting the market's lack of confidence in this new venture? Or could this be a good entry point for us? Thanks!

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  2. Alex LuMonday, December 06, 2010 10:33:00 AM

    Hi AlexP,

    BPPastic's financial performance is good & steady. It makes about 8-9 sen per annum. this gives the stock a PE of about 7 times- reasonable valuation for a small cap.

    Its financial position as at 30/9/2010 is quite healthy, with no borrowings & current ratio at more than 5 times. It has a cash balance of 53 million or 30 sen per share. This cash reserve will slowly be drawn down over the next few years as the company investment in a rubber plantation in Cambodia.

    Chartwise, BPP has been consolidating within a descending triangle with support at RM0.55-0.56 & resistance at RM0.62-0.63. A break above RM0.62-0.63 would lead to the continuation of its prior uptrend.

    If you have loads of patience, you can at RM0.55-0.56. If you want to get into a fast move, buy when it breaks above RM0.62-0.63.

    ReplyDelete