Thursday, September 08, 2011

Puncak- a high risk & risk reward trade examined

Puncak has been dropping steadily since the middle of July after it broke below its horizontal support of RM2.00. This stock is negatively affected by poor financial performance (due to its inability to secure higher water tariff rates) and steady selldown by local funds. Amongst the big funds selling down their stakes in Puncak are EPF & Amanah Saham Wawasan 2020 with a 11% and 6%-stake respectively in Puncak. For details of their recent selldown, go here & here.

From Chart 1 below, we can see that Puncak has dropped almost to the lower boundary of its Bollinger Bands. In the past two occasions when it tested the lower boundary, Puncak snapped back to the 20-week SMA line. If the same action were to recur, Puncak may jump back to RM1.70. Puncak's immediate horizontal support is at RM1.15 & the next support would be the psychological RM1.00 level. From Chart 2 below, we can see that Puncak is now trading at its all-time low. In technical analysis, a stock that has made a new low is a dangerous trading proposition. The readers must take this into consideration if he/she wishes to try this high risk & high reward trade.


Chart 1: Puncak's weekly chart as at Sept 5, 2011_plotted on log scale (Source: Tradesignum)


Chart 2: Puncak's monthly chart as at Sept 5, 2011_plotted on log scale (Source: Tradesignum)

Note: As at 9.30am, Puncak is trading at RM1.25.
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9 comments:

  1. ttgipohFriday, September 09, 2011 10:00:00 AM

    puncak at 1.31, buyers overcome sellers.

    ReplyDelete
  2. AnonymousFriday, September 09, 2011 10:28:00 AM

    Hi Alex

    Can you comment on Rimbunan sawit prospect. It has right issue of 3 for 1, at 80sen each follow by bonus 1 for 1. Is it worth of investing?

    Based on its latest Q2 EPS of 15.2sen, its annualized EPS could be as high as 55sen, give rise to PE of just 4x. If take into account its outstanding ICPS, fully diluted EPS is at 27sen, or PE of 8x. In turn of palm oil age profile and earning growth, RSB is much superior than others. I'm just wondering on why RSB trade at discount to its peers, which trade at least PE 12-15x?

    ReplyDelete
  3. Remnant 888Friday, September 09, 2011 11:07:00 AM

    Thanks for highlighting this. Investors beware... Earning is not bad: it's horrible..!!!
    This is one to avoid. Period.

    ReplyDelete
  4. tok perakFriday, September 09, 2011 3:18:00 PM

    wow.wow. it go up 17 sen as at 3.20 pm today

    ReplyDelete
  5. BeeFriday, September 09, 2011 3:22:00 PM

    Alex,

    can you have a look at CIMB? it was heavily supported during the recent selldown. Thanks.

    ReplyDelete
  6. CPSaturday, September 10, 2011 8:23:00 AM

    Hi Alex

    Thanks for alerting others about the HIGH RISK.

    Personally, I grabbed in the morning but slod her off when I saw the huge jump. Yes, this is a terrible counter to buy. I agreed.

    Thanks.

    TEH

    ReplyDelete
  7. Alex LuMonday, September 12, 2011 5:22:00 PM

    Hi CP

    Puncak incurred huge losses because it was unable to secure higher water tariff rates. However, the water concession assets are very likely to be taken over by the state government & the value of its underlying assets is higher than the current share price. I believe the market is worried about how Rozali will use the cash. Instead of distributing it to the shareholders, he might use it to buy up his personal companies.

    ReplyDelete
  8. Alex LuMonday, September 12, 2011 5:25:00 PM

    Hi Bee

    CIMB did a double top reversal. Using simple projection, the stock is expected to hit the RM6.50-6.60 level. However, the immediate horizontal support is at RM6.95-7.00. Thus, you can see strong support over the past few days.

    If this level is taken out, the next support is the horizontal line at RM6.00.

    ReplyDelete
  9. Alex LuMonday, September 12, 2011 5:39:00 PM

    Hi hng

    I did a quick check of small to medium size plantation companies, such as SWKPlant, NSOP, SOP, HSPlant & THPlant, and they traded at 8-9 times their annualized earning. RSawit trades at 4.5 times its annualized earning. It is surprising low. MHC also trades at low PE of 4.9 times. I can't explain it.

    ReplyDelete