KEuro- an interesting stock worth close tracking

In The Edge newsletter, there is an article about KEuro finalizing the deal to construction the West Coast Expressway (WCE). Construction work may start end of the year. This may explain the sudden jump in the share price of KEuro last Friday. The stock tested the medium-term downtrend line at RM1.10. IF Keuro can break above this downtrend line, that would be very positive as it would signal the end of the downtrend. (Note: KEuro rose to a high of RM1.14 this morning. As at 9.50am, it is trading at RM1.10.)


Chart 1: KEuro's daily chart as at Sept 9, 2011 (Source: Quickcharts)

However, we must note that KEuro has broken below the accelerated intermediate term uptrend line (S1-S1) at RM1.00 in the middle of August. Nevertheless, the stock managed to stay above its strong horizontal support at RM0.87. The strong rally on last Friday sent the stock back above the accelerated uptrend line, S1-S1 at RM1.05. Can it stay above this level?


Chart 2: KEuro's weekly chart as at Sept 9, 2011 (Source: Quickcharts)

IF KEuro can break above the medium-term downtrend line at RM1.10, the stock could be a trading BUY. Given the poor market sentiment, I would not be surprised if the stock failed to do so. In that event Keuro were to slide back to lower prices, I believe this stock could be an interesting long-term investment stock, with good entry level at RM0.90-1.00.

The financial closure for the WCE concession agreement & the huge tract of land (of 1878 acres that was awarded by the Selangor state government as compensation for the termination of the Canal City project) are the two valuable assets of KEuro. These two assets should generate strong income for the company over the next 5-10 years. For more, check our RHB's research report (here); an old article in The Edge (here); & the latest article in BTimes (here).

Note: The technical analysis in the BTimes article by well-known technical analyst, SN Lock differs from my analysis. The difference is due to the drawing of the trend lines. This goes to show that technical analysis is an art. The same can also be said about fundamental analysis where projection about future earning & assumption about investors' risk appetite- both directly affect the valuation of stocks- call for subjective judgement and as such is also an art. Like any art form, technical or fundamental analysis is applied differently by the users due to their different background. There is no right or wrong answer. As any seasoned trader or investor can tell you, the most important thing to have is a flexible mind and the humbleness to admit that the crowd is always right.