Thursday, August 27, 2015

Silverlake Axis: Targeted for a Short?

Silverlake Axis is one of Malaysia's most successful software companies whose products, systems, and solutions serve many major financial institutions in the Southeast Asia. It is listed in SGX. 

On August 21, the stock came under heavy selling due to a report that its profit record was built on related party transactions that may not be genuine. For more, go here. As a result of this heavy selldown, the stock tumbled from S$0.80 to a low of S$0.40.

 Table: Silverlake Axis's Key Statistics (Source: Yahoo Finance)

We do not know where the truth lies. Silverlake Axis has appointed Deloitte Singapore to undertake an audit to clarify this matter. Notwithstanding this positive action, once the psychology behind any growth stock is broken - where the investors now have doubt about their basis of investing in the stock - that stock will take a long time to recover.

From the chart below, we can see that Silverlake Axis is a trending stock. The good thing about a trending stock is that you will roughly know when it is in a trend and when that trend has reversed. We can see clearly that Silverlake Axis broke its "uptrend line" at S$1.10 in early June. While its recent volatile price swing makes for difficult reading, I am pretty sure we have not seen the bottom for this stock. Its immediate support level is at S$0.30 while its immediate resistance is at S$0.55. At the time of writing this post, the stock is trading at S$0.545. If you have bought it for a quick trade, this is a good level to take profit.

 Chart: Silverlake Axia's weekly chart as at Aug 27, 2015_3.30pm (Source: Yahoo Finance)

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Silverlake Axis.

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