General insurance companies rallied!

As part of BNM's plan to de-tariff motor insurance by 2016, motor insurance tariffs will be gradually revised upward from Jan 1, 2012. For more, go here & here.

Since the announcement, we have seen a steady rise in the share prices of a few weaker insurance companies, such as MAA, Kurasia & P&O. While Kurasia & P&O are general insurance companies, MAA is a composite insurance company. MAA has been rising very strongly since April 1 (no joke!)- jumping from less than RM0.80 to RM1.20 today. Now it seems that it may be selling of 70% of its composite insurance subsidiary, Malaysian Assurance Alliance to Zurich Insurance Co Ltd for RM1.2 billion. For more, go (here).

From the chart below, we can see that MAA broke above the "Cup with handle" formation at RM0.90 level on April 1 and rallied strongly. Today, it closed at the horizontal resistance-turned-support line of RM1.20. Its next resistance would be the horizontal line at RM1.40 (see Chart 1 below). If it can break above the RM1.40 level. it may test the long-term downward channel at RM2.00 (see Chart 2).


Chart 1: MAA's daily chart as at April 6, 2011 (Source: Quickcharts)



Chart 2: MAA's weekly chart as at April 4, 2011 (Source: Tradesignum)

Kurasia has yet to break above its long-term downtrend line at RM0.50. Its immediate support is at RM0.45.


Chart 3: Kurasia's weekly chart as at April 4, 2011 (Source: Tradesignum)

The technical outlook for P&O is better than Kurasia. It has broken above the downtrend line at RM0.80 on April 1. Its immediate support is the horizontal line at RM0.88 & the immediate resistance is at the horizontal line at RM0.93.


Chart 4: P&O's daily chart as at April 6, 2011 (Source: Quickcharts)

Based on the above, MAA & P&O are the stocks that are potentially tradable. My preference would be for P&O due to the bullish technical breakout. While MAA has also achieved a bullish breakout, it has gone up too much & could be due for some correction.