Tuesday, January 18, 2011

Market Outlook as at January 18, 2011

In the last few days, I was busy in the market & didn't post anything other than the possible correction for CPO (here). I was also not sure of the market direction. A few of the stocks that I have recommended did quite well initially but they subsequently dropped back to the breakout level. Many stocks jumped sharply on breakout & then faded away. Since Jan 1, I noticed the following:

1. Blue chips jumped sharply on Jan 5 & dropped back (eg. CIMB, Maybank, PBBank, Sime).
2. Plantation stocks hit a high on Jan 4 & have been sliding ever since.
3. Oil & Gas stocks ran up steadily & corrected sharply on Jan 13.
4. Property stocks hit a high on Jan 13 & 14 and are now sliding off.

This rotational play for stocks & sectors are not uncommon but what's disturbing is that these stocks have dropped back to their breakout level in many cases. Further decline would lead to the build-up of a pool of stale bulls. In addition, the huge volume traded in the past 2 weeks has created a large stock overhang. Finally, we are two weeks away from the lunar new year, which is a very short trading week with only 2 trading days (on Monday, Jan 31 & Wed, Feb 2). The shortened trading week caused traders to reduce their open position & the prevailing stock overhang can only be cleared at lower prices. All these point to a weaker market for the next 2 weeks.

Chartwise, FBM-KLCI should have good support at the 20-day SMA line at 1550. Below this support, we can see very strong support at the horizontal line of 1524 which coincides with the uptrend line support at 1525.


Chart: FBM-KLCI's daily chart as at Jan 18, 2011_12.00am (Source: Quickcharts)
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13 comments:

  1. ALFANGTuesday, January 18, 2011 3:28:00 PM

    Hi Alex, any idea what happen to
    SPSetia, sharp drop today ?

    ReplyDelete
  2. Michael LTuesday, January 18, 2011 7:03:00 PM

    Hi Alex,

    Thanks for your comment on Masteel.

    Someone has recommended to go for KEURO and it seems up quite substantially for the pass 2 months. Could you pls provide your thought on this counter.

    Thank you.

    ReplyDelete
  3. HTuesday, January 18, 2011 10:16:00 PM

    Dear Alex,

    Pardon me. I would like to know what's your comment about kinstel and hunzpty?

    Thanks.

    ReplyDelete
  4. IvanTuesday, January 18, 2011 10:32:00 PM

    Bro,

    Happy CNY!
    Looking at the chart you posted, MACD seem pullback.
    Right?

    ReplyDelete
  5. AnonymousThursday, January 20, 2011 6:22:00 PM

    Hi Alex

    Thanks for the update and getting people to put on their thinking cap. Going back to Leslieroycarter's comment about Keck Seng suppressing its own share price by selling treasury shares at lower prices day after day, I think he has a point. It seems that this is what is happening.
    And its bonus offer seems to take eternity to carry out. Is there a time limit imposed by Bursa for companies to complete their bonus issue plan?
    Your fans are wondering whether your Oct posting about Keck Seng still holds. Why should investors keep Keck Seng shares if the company is selling its own?

    Regards

    ReplyDelete
  6. ckThursday, January 20, 2011 10:28:00 PM

    Hi Alex,

    It's really nice to have your comments!
    What's your take on KNM's mid-long term prospect? Some buddy is having some KNM @ 1.10 (4.40 now), should he hold on?

    Thanks & Good Day!
    ck

    ReplyDelete
  7. Alex LuFriday, January 21, 2011 4:28:00 PM

    Hi ck

    KNM's medium to long term prospect is still cloudy. While the stock is still in a very long-term uptrend, its intermediate term downtrend that began in 2008 is still intact. These two opposing forces are well-balanced & the stock is likely to trade sideway after its recent rally. It has broken below the RM3.00 psychological support. Its next support is the horizontal line at RM2.80.

    ReplyDelete
  8. Alex LuFriday, January 21, 2011 4:56:00 PM

    Hi zhouyu44

    My October 2010 call on Kseng remained valid as long as the share price stays above the RM6.23-25 level. The latter is the upside breakout level of the earlier drawn triangle.

    It's true that the proposed Bonus Issue is taking a very long time to be implemented. Is there a reason to this? I don't know. Is it a plot to suppress the price? I don't think so. I think the price is correcting back as investors have given up on the privatization play and they are skeptical of a push prior to the Bonus Issue. But, I could be wrong. Let's wait & see.

    ReplyDelete
  9. Alex LuSaturday, January 22, 2011 4:08:00 PM

    Hi Ivan

    MACD has hooked down. This may explain the correction of the past 2 days.

    ReplyDelete
  10. Alex LuSaturday, January 22, 2011 4:23:00 PM

    Hi H

    My technical take on:
    1. kinstel will face very strong resistance at the horizontal line at RM1.10. In the past 18 months, kinstel has been trading between RM0.80 & RM1.10. The only occasion where it broke above the range was in early 2010 when it went to a high of RM1.20.

    2. hunzpty is in an uptrend since July 2010. The 50-day SMA line can be used as its uptrend line & that SMA line is now at RM1.68-1.70 & it could be a good entry level for the stock.

    ReplyDelete
  11. Alex LuSaturday, January 22, 2011 4:27:00 PM

    Hi Michael

    KEURO is rising on positive development for its West Coast Highway project. The other major beneficiary of that project is IJM, its major shareholder & the likely contractor for the highway.

    KEURO is in an uptrend line with support at RM1.50. That coincides with the 20-day SMA line which has also acted as a support whenever the share price weakened over the past 2 months.

    ReplyDelete
  12. Alex LuSaturday, January 22, 2011 4:47:00 PM

    Hi ALFANG


    SPSetia has a sharp pullback after announcing the 1-for-2 Bonus Issue on Jan 17 & the IMR Bangsar land swap (link below). Once again, this development put paid to the idea that one should buy on rumor & sell on news. However, we can see that a dark cloud cover (a bearish Japanese Candlestick pattern) on Jan 14 & followed by an inverted hammer (another bearish Japanese Candlestick pattern) on Jan 17. The subsequent fall confirmed the end of the uptrend for SPSetia. If SPSetia breaks below the 20-day SMA line at RM6.30 [which was the stock's all-time high], we may see a pick-up in the drop in the share price.

    http://www.theedgeproperty.com/news-a-views/6146-s-p-setia-maybank-ib-research-maintain-buy-target-price-rm690.html

    http://www.trader-soft.com/japanese-candlestick/definition/dark-cloud-cover.html

    ReplyDelete
  13. AnonymousSunday, January 23, 2011 5:05:00 AM

    Hi Alex

    Thanks for giving more insight into the Keck Seng counter.
    Leslieroycarter was first to point the view that the company seemed to be suppressing its share price thru selling of treasury shares.

    In case, readers of this blog think Alex and us are discussing rumour, it must be pointed out that this is not so. Checks with Bursa's company announcement website showed the company had been selling treasury shares quite actively since Jan 13 to 18. This coincided with the decline in share price.

    In a down or stagnant market, companies normally buy back their own shares, not sell them. And if the company had ever considered privatization, then it would strengthen the theory of share price suppression so that mopping up shares become cheaper for the company.

    We will give the company the benefit of the doubt. But what is the truth? God knows.

    Thanks and Gong Xi Fa Cai.

    ReplyDelete