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Minor profit-taking from KLCI’s new high of 1,892.33

US STOCK MARKETS climbed on Wednesday as investors speculated whether the American economy is recovering from a first-quarter contraction. The US Treasuries also advanced while the greenback fell.

The SP 500 Index gained 9.55 points to close at 1,959.53 points while the Dow Jones Industrial Average rose 49.38 points to end at 16,867.51. European share markets, meanwhile, tumbled on Wednesday as the Iraq and Ukraine crises deepened.

The FBM KLCI traded in a narrow range of 10.51 points for the week with higher volumes of 1.42 billion to 2.01 billion shares traded. The index closed at 1,889.97 yesterday, up 0.42 of a point from the previous day as blue-chip stocks like British American Tobacco (M) Bhd, Genting Bhd, Petronas Dagangan Bhd, PPB Group Bhd and SapuraKencana Petroleum Bhd caused the index to rise on late afternoon nibbling activities.

The index reached an all-time high of 1,892.33 on Tuesday.

The KLCI rose on a rally from the 801.27 low (October 2008) to the previous 1,826.22 all-time high (May 2013) and it represented an extended Elliott Wave “Flat” rebound in a “Pseudo-Bull” rise completed. The price movements in the index in the next few months following May 2013 were trapped in a rangy consolidation with key swings of 1,723.74 (low), 1,811.65 (high), 1,660.39 (low), 1,805.15 (high), 1,759.66 (low), 1,882.20 (high), 1,769.80 (low), 1,838.69 (high) and 1,802.88 (low).

The index’s daily signals are all positive, as the CCI, DMI, MACD, Stochastic and Oscillator have issued “buy” readings. As such, the index’s obvious support levels are seen at 1,845, 1,860 and 1,889, while the resistance of 1,891 and all-time high of 1,892 will witness some liquidation and profit-taking activities.

Its simple moving averages depict a marginal uptrend for its daily, weekly and monthly charts. Despite its upbeat chart signals, we believe investors will adopt a “range trading” tone for the KLCI.


With the very obvious bearish divergence signals on its indicators, there would be diminished chances of significant upside for the index currently. For now, the KLCI may be buoyant for a test of its next two short-term upside targets of 1,900 and 1,918.

Due to the better tone of the KLCI, we are recommending a chart “buy” on Tambun Indah Land Bhd, whose share price hit a new 52-week high at RM2.24 yesterday. Tambun recently acquired 209.5 acres (84.8ha) of land in Simpang Ampat, Prai in Penang, which will boost its landbank and make it a significant property player in that area. The impact of the land acquisition can be seen by the strong investor interest in the stock.

A check of Bloomberg consensus reveals that four research houses have coverage on Tambun and all of them have a  “buy” call on the stock. Bloomberg’s consensus 12-month target price for Tambun is RM2.58. The stock is currently trading at an attractive historical price-earnings ratio of 9.86 times but at a pricey price-to-book value ratio of 2.39 times. Tambun’s 12-month dividend yield is at a reasonable 2.39% and it has a good return on equity of 22.0%.

The company’s chart trend on the daily, weekly and monthly time frames is up. Its share price made an obvious surge since its weekly Wave-2 low of 57 sen in September 2012. Since that 57 sen low, Tambun has surged to its recent June 2014 high of RM2.24.

Its chart is in very strong daily, weekly and monthly uptrends with its move to yesterday’s high of RM2.24. As it broke above its recent key critical resistance levels of RM1.88 and RM2.08, look to buy Tambun on any dips to its support areas as the moving averages depict very firm short to long term uptrends for this stock.

The daily, weekly and monthly indicators (like the CCI, DMI, MACD and Oscillator) are very strong and now depict the firm indications of Tambun’s eventual move towards much higher levels.

It will attract very firm buying activities at the support levels of RM1.88, RM2.08 and RM2.19. We expect Tambun to attract minor profit-taking towards its resistance levels of RM2.22 and RM2.24. Its upside targets are located at RM2.41, RM2.91 and RM3.19.




This article first appeared in The Edge Financial Daily, on June 27, 2014.

 

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