Profitability Of Technical Analysis In The Malaysian Stock Market
KUALA LUMPUR STOCK MARKET OUTLOOK: Forecast for Thursday, June 14, 2007: Property, construction and oil and gas stocks play to resume soon. Acumulate.
Technically speaking:
1.As at Wednesday's close at 1353.03 the KLCI was lower by 7.55 points but on slightly lower volume of 1.144 bln shares. Losers led gainers 494 to 361.
2.Considering that the Dow fell 129 points, the KLCI's loss of a mere 7.55 points as well as Malaysian stocks' marginal losses are a good sign of local market resilience and demand.
3.We were seeing "red" on all Asian stock bourses yesterday, but there is one bourse that stood firm and closed higher for the day - and it is none other than the China stock market. The Shanghai index was up 2.56% and the Shenzhen index is higher by 2.47%, oblivious of the Dow's drop. If only the Malaysian market can perform like Chinas'!
4.Yesterday was another lackluster day on the KLSE. Although the daily volume was "high", we observed that most of the active counters belonged to lower liners, second boards and Mesdaq stocks.
5.For the past five sessions or so, the stocks that rose by leaps and bounds were lower liners like TANAMAS, LATEXX, MVEST, SINORA, CEPAT, GUOCO and MYCOM.
6.On the other hand, our property, construction and oil and gas stocks were going nowhere but consolidated instead. The KLCI was also going nowhere, but remained trapped within a trading range giving rise to doubts as to whether the KLCI's up trend is still intact.
7.Technically speaking, although the KLCI and the quality second liners are languishing sideways or lower, we cannot say that this bull market is over because many stocks are above May 31 low. As for the KLCI, it is still within the confines of the Bollinger band. As long as the KLCI is not below the lower band, i.e. below 1343, it is too premature to classify that we are in a bearish trend.
8.However we must admit there are some technical signs that weakness are setting in via the negative crossings of the weekly stochastic and MACD indicators. This is, fortunately, not confirmed by other indicators like Bollinger bands and RSI which remained bullish. We are thus experiencing mixed signals.
9.On the other hand we observed that the KLCI is oversold and we expect property, construction and oil and gas stocks to pick up steam soon, if not today.
10.We are looking to "average buy" stocks that have pulled back the last few days to a week ago.
11.They are MRCB, LIONDIV, FAVCO, HUNZPTY, KHSB*, TEBRAU, RAMUNIA*, SAPCRES-WA* SAPTECH.
12.New stocks-to-watch are: MCMTECH, ENCORP and DIGI.
13.In so far as plantation stocks are concerned we see it apt to take profits and stay out for the time being as falling CPO prices are hurting CPO stock prices. Many of our plantation stocks have triggered sell signals.
14.The ringgit weakened back from 3.4415 to 3.4720 or 305 pips due to the strengthening of the U.S. dollar, but so are the other world currencies. This nullifies the negative effect of ringgit weakness as the rest of the world's currencies also fell in tandem.
CONCLUSION: In spite of the Dow's 129 points fall, our market remained steadfast. We do not expect our market to drop so soon. We should see a strong rally before any plunge, just like how the CPO market "burst" it bubble. We would continue to pick selectively strong sector stocks from the property, construction and oil and gas sector. The oil palm or plantation sector may face some correction as CPO prices retreat. Stay out of palm oil stocks for now. We remain invested as the KLCI is still within the Bollinger bands.
Long-term Upside Targets:1368/1494 (Target amended on 1/6/07).
Immediate downside targets: 1334/1291/1222 By: Fred Tam Article Source: http://www.ArticleDashboard.com Fred Tam is the owner of www.fredtam.com and
www.picapital.com.my F1 Trader Online - Know when to enter & exit the markets.
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