Berjaya Sports Toto Berhad

We have 3 more trading days before 2008 come to a close. For the bulls, 2008 is a year to be forgotten whereas the bears had a jolly good time.

2009 looks to be another tough year for business worldwide and economists have all predicted that recovery in the economy will come in the later part of 2009. Given that fact that stock market leads the real economy, a rebound in equities should materialize before the end of the second quarter

Company like Berjaya Sports Toto Berhad, which is in the gaming industry providing digit type games like 4D, 5D, lotto etc should be able to survive the downturn.

The technical chart is showing a slightly bullish bias. The MACD had just cut above its signal line. RSI is also increasing after hitting oversold levels. +DI is above –DI and ADX is beginning to bottom out. The stock price is now riding on an upward channel. However with ADX at a low level, it does not make sense to expect a strong rally at this point.

Support is at RM 4.40 and resistance is at RM 4.80. One way to play this stock is to wait for a pullback to the RM 4.40 level and to hold for a test of RM 4.80. For example, if you decide to enter at RM 4.50, stop loss at RM 4.40 and profit target RM 4.80, that will be a risk of RM 0.10 and potential profit of RM 0.30.

Sime Darby

Sime Darby almost halved its net income target on Nov. 28 to 1.9 billion ringgit for the year to June 2009. Palm oil, the biggest contributor to profit, has tumbled and the global recession has weakened demand for houses and vehicles.
Sime Darby's revised earnings goal is about 34 percent lower than the average analyst forecast.

The technical chart looks bad. Yesterday drop was on heavy volume.

The MACD indicator is way below its signal line. ADX is creeping up and with –DI above the +DI, this may turn out to be the beginning of a downtrend.

RSI is in oversold territory but stocks that are in a downtrend will stay in oversold region for extended duration before rebounding.

The stock broke through the RM 5.45 support yesterday. This level will be the resistance for any up move from this point.

With fundamentals weak and technical chart not showing any sign of rebound, it is best to avoid the stock until a clearer picture emerges.

Genting Bhd Update

Genting has broken down of the down trend channel and has broken through the previous support area of RM 4.30.

It closed at RM 4.08 which is just below the 61.8% retracement level. MACD just made a bearish crossover and indicates more weakness going forward. The breakdown occurred on high volume indicating that investors were eager to get out of the stock.

A re-test of RM 3.58 cannot be ruled out. The next few trading days will be crucial. Let’s see if the stock can hold above RM 3.58.

Genting Bhd

Genting Bhd closed at RM4.52 on Wednesday.

The price is now within the Bollinger band and is sitting near the 20 day moving average. It looks like moving into consolidation phase.

The MACD indicator is above its signal line and is indicating further strength. The RSI indicator is moving up from oversold levels and is approaching the 50 level.

The stock is most likely able to hold on to support of RM4.30. Immediate resistance is at RM4.75.

KLCI Update

KLCI should see some strength today. The question is whether we will see a more sustain move or just a one day wonder.

MACD is still showing a bullish sign with the indicator above its 9 day signal line.

RSI is ticking up but is still below the 50 level. If it is able to get above 50 level, it will be bullish. The RSI indicator has not been above to clear the 50 level in all previous attempts and the last time the indicator was above 50 was in July 08.

The –DI is still above +DI which indicates a weak market. However, the ADX has come down as well. This means that we are not likely to experience the severe down move that we saw in the past 2 months.

The index was able to hold on to the 61.8% Fibonacci retracement level last week. If this support holds, there will be chance for the index to test 926.

Dow Support Level

Dow closed at 8424 on Tuesday, up 151 points. The index tested 7947 level, the low established on 13 Nov 08. It managed to rebound and claw back above the 8000 level. Buyers came in only in the last hour of trading.


The index looks to be forming a double bottom and has managed to find buyers whenever it hit below 8000. Next resistance level is at 8835 and support level is at 8085.

KLCI Update

The market turmoil continues.

KLCI is now at 859 levels. It looks likely for the index to test the next support at 817.


The technical charts for KCLI are not looking good. The MACD line is still below its 9 day signal line showing a bearish bias. There is no divergence in the MACD with respect to price movement, so it is not logical to expect a sustainable a rebound at this point.

ADX is at value of 55 and with –DI above +DI, it indicates a continuation of the down trend.

RSI is oversold at this level but in a downward trending market, oversold market tends to become more oversold.

KLCI Update

US market tried to overcome from market weakness on Friday. However at the close, it succumbed to market forces and Dow was down 127 points.

At one point, the Dow index managed to put on a gain of nearly 300 points. The optimism could not hold and the index gave back all the gains plus some extra losses to end at 8852.

The KLCI index dropped 14 points on Friday in anticipation of further weakness in the US market. The index gave up all the gains made on the first 2 days of the week.

The index has broken through the 62% re-tracement level and is now heading towards the low of 615 set in March 2003.

The support level is at 860 and 817.

VIX Indicator

Market players are waiting to see whether US officials will be able to come to an agreement to the bailout package. The market has been plagued by high volatility lately.




The VIX closed at 34.73 on Friday. It spiked to a high of 42.16 on 18 Sep. Assuming that you buy into the Dow Industrial Average when the VIX went above 40 and hold the trade for approximately 1 year, the trading result is as follows:

Entry Date	Entry Level	Exit Date	Exit Level	% Change
1-Sep-98	7583.09	7-Sep-99	11079.08	46.1
4-Sep-98	7737.32	10-Sep-99	11087.00	43.29
8-Sep-98	7964.91	13-Sep-99	11027.40	38.45
11-Sep-98	7583.61	16-Sep-99	10795.77	42.36
14-Sep-98	7936.08	17-Sep-99	10745.38	35.4
1-Oct-98	7749.42	6-Oct-99	10399.77	34.2
2-Oct-98	7631.50	7-Oct-99	10588.34	38.74
5-Oct-98	7760.75	8-Oct-99	10534.52	35.74
6-Oct-98	7733.97	11-Oct-99	10649.76	37.7
7-Oct-98	7754.82	12-Oct-99	10648.81	37.32
8-Oct-98	7734.48	13-Oct-99	10412.31	34.62
9-Oct-98	7806.57	14-Oct-99	10230.89	31.05
12-Oct-98	8038.03	15-Oct-99	10286.61	27.97
13-Oct-98	7982.68	18-Oct-99	10018.45	25.5
14-Oct-98	7925.01	19-Oct-99	10117.54	27.67
18-Sep-01	8922.70	23-Sep-02	7984.77	-10.51
20-Sep-01	8375.72	25-Sep-02	7687.16	-8.22
21-Sep-01	8356.56	26-Sep-02	7844.62	-6.13
24-Sep-01	8242.32	27-Sep-02	7996.01	-2.99
23-Jul-02	7785.55	28-Jul-03	9284.92	19.26
24-Jul-02	7698.46	29-Jul-03	9268.19	20.39
5-Aug-02	8312.92	8-Aug-03	9127.36	9.8
6-Aug-02	8049.93	11-Aug-03	9189.62	14.16
7-Aug-02	8282.25	12-Aug-03	9218.12	11.3
20-Sep-02	7945.93	25-Sep-03	9425.58	18.62
25-Sep-02	7687.16	30-Sep-03	9378.10	22
8-Oct-02	7425.82	13-Oct-03	9675.72	30.3
9-Oct-02	7499.96	14-Oct-03	9763.27	30.18
10-Oct-02	7286.34	15-Oct-03	9824.09	34.83
19-Sep-08	11027.51	Open	Open	1.05

You have a total of 30 trades with 26 ending with a profit.

IOI Corporation

All eyes will be on whether the US government is able to agree on a bailout package this Sunday. Although the bailout package may not be able to solve the current economic problems, failure to agree on a bailout package will definitely be negative for the stock market.

Commodities related counter have been affected by the expected slow down in the global economy which will result in lower demand and hence lower commodity prices. IOI Corp has not been spared the down swing as well.

The chart is looking better compared to a few weeks ago.



The MACD line has cut above its signal line, indicating a possible up move. There is also a divergence between price and MACD line.

Another promising sign is the decline that started from 23 Sep occurred with diminishing volume.

One possible way of playing this stock is to wait for a breakout of RM 4.86. This will reinforce the MACD divergence signal. Once entered, the stop loss level can be set at RM 4.36.

KLCI Fibonacci Analysis

The KLCI is still in a down trend. Based on Fibonacci analysis, the index is set to drop below 1000 points.

Lets do a Fibonacci analysis on the recent down move. From Point A to Point B, the index dropped from 1436 to 1157. The rebound to Point C (1305) retraces 50% of the move from A to B. Since the index did not clear Point A, the down trend was still in place and the projected objective point rests at 1026 which is calculated from the following:

Objective Point = 1305 – (1436-1157)
= 1026

This objective point was near Point D of 1089.

The current up move from Point D to E did not clear the 38.2% retracement level. The objective point for this move will be:

Objective Point = 1164 – (1305-1089)
= 948

Hence based on Fibonacci analysis, the index is likely to go below 1000 points.

IOI Corp

IOI Corp has been affected by the fall in palm oil prices. The price is now near the lower Bollinger Band.

The –DI is slightly above the +DI with the ADX decreasing from a high level indicating that the down trend is slowing down.

MACD line is about to cut the MACD Signal line which bearish if the cutover occurs. However, if the stock price is able to rebound from current levels, there is likelihood that we will see divergence in MACD as well as RSI. Divergence usually indicates a reversal in trend.

KLCI Sep Performance

Historical results from 1994 to 2008 have shown that September is not a very good month to have a long position.

Entry Date	Entry Price	Exit Date	Exit Price	% Change
1-Sep-94	1,135.20	30-Sep-94	1,131.08	-0.36
1-Sep-95	1,014.96	29-Sep-95	992.16	-2.25
2-Sep-96	1,117.21	30-Sep-96	1,130.76	1.21
2-Sep-97	811.15	30-Sep-97	806.79	-0.54
1-Sep-98	294.76	30-Sep-98	376.61	27.77
1-Sep-99	766.01	30-Sep-99	683.18	-10.81
1-Sep-00	795.26	29-Sep-00	721.85	-9.23
3-Sep-01	686.35	28-Sep-01	614.57	-10.46
2-Sep-02	710.75	30-Sep-02	644.61	-9.31
2-Sep-03	743.17	30-Sep-03	736.37	-0.92
1-Sep-04	828.96	30-Sep-04	846.76	2.15
1-Sep-05	913.08	30-Sep-05	925.03	1.31
1-Sep-06	959.04	29-Sep-06	967.74	0.91
3-Sep-07	1,283.93	28-Sep-07	1,339.43	4.32
2-Sep-08	1,097.08	Open	Open	-0.92

In total there were 6 winning September months, about 42% that your position will be higher compared to the beginning of September. Let’s cross our fingers and hope that there will not be a double digit percentage losses this month. Do trade with care.

KLCI Update

KLCI index closed at 1159 on Friday, up 18 points for the week. The technical indicators are looking better for the index.

The index has broken the upper channel line of the down trend line and there was a positive divergence between price and its 14 day RSI indicator.

The index has to stay above a low of 1089 in order to make a higher low. And if the index moved above 1163, then we will have a case of higher high and higher low which according to Dow’s theory is a bullish sign.

The ADX is also decreasing showing that the Bearish trend is weakening. The +DI is now slightly above the –DI another bullish sign.

IOI Corp

Palm oil stocks have been sold down for the whole of last week. This drop coincides with the drop in crude oil prices.

Looking at the chart of IOI Corp, we can see that the trend is clearly downwards. The ADX is approaching the 40 level and the –DI is higher than +DI by a considerable amount. This indicates a potential for a strong down market.

The MACD is also painting a negative picture with the indicator below its signal line.

The stock is clearly oversold going by the RSI indicator. However, oversold market doesn’t mean the stock will rebound and going by the negative sentiment so far, any rebound should be seen as an opportunity to get out of this stock.

Dow Update

It was a see-saw trading session on Friday for the US Market. The Dow Industrial Average dropped to a low of 10978 before bouncing to a high of 11239. The Bears attacked the market again bringing the index down to close at 11100.




The index managed to make a higher high and higher low on the 5 minute chart which indicates some strength towards the closed of the session.

The VIX is charging towards the 30 level again, with the indicator hitting a high of 29.44. There are fears in the market again.



The next support for Dow is 10849.

KLCI Update

KLCI index is painting a “Bearish” picture.

The ADX is increasing and is above 20 level which shows a strong trend is developing. The –DI is greater than the +DI by a great margin, indicating a Bearish trend.

The MACD is below its signal line, another evidence of a Bearish market.

RSI is less than 30 indicating that the market is oversold. However an oversold market doesn’t mean that market will rebound strongly.

It is not advisable to trade the market from the long side given the bearish picture.

KLCI July Performance

June is coming to an end. This is the historical performance of the KLCI index from 1994 onwards.

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Draw Down %	Max Gain %	Bars Held
7/1/1994	1008.43	8/1/1994	1029.58	2.1	-3.2446	2.0973	21
7/3/1995	1025.85	8/1/1995	1059.91	3.32	-1.0391	4.9647	21
7/1/1996	1135.81	8/1/1996	1067.39	-6.02	-7.6404	0.4543	22
7/1/1997	1077.30	8/1/1997	1012.78	-5.99	-8.2456	0.7537	22
7/1/1998	454.73	8/3/1998	403.41	-11.29	-15.1211	6.8634	22
7/1/1999	819.70	8/2/1999	768.92	-6.19	-8.6605	6.184	22
7/3/2000	830.13	8/1/2000	799.59	-3.68	-5.4425	4.2198	21
7/2/2001	591.66	8/1/2001	660.06	11.56	-1.1814	12.7523	22
7/1/2002	727.73	8/1/2002	721.33	-0.88	-2.0365	3.1056	23
7/1/2003	691.93	8/1/2003	721.06	4.21	-0.1431	6.6466	23
7/1/2004	820.47	8/2/2004	832.69	1.49	-0.0073	4.6181	22
7/1/2005	888.18	8/1/2005	938.30	5.64	0	6.0427	21
7/3/2006	914.61	8/1/2006	935.41	2.27	-1.6816	2.717	21
7/2/2007	1357.78	8/1/2007	1367.29	0.7	-1.0348	2.5335	22

There is a total of 8 profitable and 6 losing "July" months.

Dow Update

US market was hammered again on Friday. The Dow closed at 11346. From the 5 minute chart of the Dow, we can see that the index was attacked by the Bears from the opening bell.


The only positive sign is a bounce off the lower Bollinger band at around 1.45pm. The index managed to stage a higher low near the 61.8% Fibonacci Re-tracement Level. It is now resting at the lower Bollinger band. The resistance level based on the 5 minute chart is at 11401. If it manages to clear this level, the next resistance is at 11440.

US Financial Sector

Dow closed at 11,824.69, down more than 200 points. The index is now very close to 11,508, the low established on Jan 22 2008.

The headlines are saying that the fall on Friday is due to credit woes and high oil prices. If you look at XLF (Select Sector SPDR-Financial), a fund that holds big financial names in US, the MACD chart is hinting on a potential reversal.



The XLF established a low of 22.13 on 11 Jun 08 and it reached a low of 21.86 on 20 Jun 08. However the MACD histogram has held above the low made on 11 Jun 08. This divergence is suggesting that a reversal is near.

However traders need to have strict discipline and stick to pre-defined stop losses in order to survive in this tough environment.

Happy trading!

KLCI Update

KLCI closed at 1229.35 on Friday. For the week, the index is down 19.22 points about 1.5%.

The index has rebounded from the lower Bollinger Band. The index managed to form a pivot point on 12 Jun 08. MACD is also creeping up but it is still below its signal line. The –DI is still above the +DI and ADX is now above 20 level which means that a down trend is developing.

The only positive sign is RSI is increasing and has cut above the 30 level. There should be a rebound early next week since Dow Jones was up 165 points on Friday.

However, the index is still looking fragile. If it breaks below 1214.37, the next support is at 1157.47 which is the low set in March 08.

Dow Update

The Bears came out to party this week. Dow closed at 12209, down 429 points for the week.

The loss on Friday erased the 214 point gain made on Thursday. Jobs number came in worst then expected and high oil prices were the culprit for the Friday decline.


Looking at the weekly chart for the Dow, there should be support at 12155, 11952 and 11508. If the index breaks below 11508, we are looking at possibility of index falling to 10849.

KLCI Update

KLCI closed 1253.12 points on Wednesday. With the Government removing the subsidy on fuel, the market reacted negatively in Thursday morning trade down more than 37 points or 3.02%.

The index is now sitting at the pivot low of 1216.38 set on 7 Apr 08. If this support cannot hold, the next one will be at 1166.


The indicators do not look good either. The –DI is now above the +DI and ADX is increasing. MACD indicator is also showing bearish signs. The RSI indicator is indicating that the market is approaching oversold level. But if a downtrend develops and the ADX goes above 20, then the market may remain oversold for a longer period of time.

Air Asia Case Study

Oil price has gone up from about 100 USD in the beginning of the year to 124 USD. That is an increase of around 24% just for 2008. High price oil will affect the earnings of companies that rely on oil for operation, example airline and transport companies.

Let’s look at the chart for Air Asia.


The stock closed at RM 0.99 yesterday. The price is currently below the 50 day, 100 day and 200 day moving average. A bearish sign.

The RSI has been below 30 since the beginning of May 08. However oversold doesn’t mean it will not go down further as illustrated by the chart.

The short term stochastic signal is showing some positive sign. But it seems to be moving down again. The bulls just do not have enough strength to push the price higher.

If you are looking to buy this counter, it is best to wait for the MACD indicator to do a crossover.

KLCI June Performance

This is the performance of KLCI for month of June from 1994 onwards.

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Draw Down %	Max Gain %	Bars Held
6/1/1994	991.60	6/30/1994	1011.58	2.01	-4.36	5.08	21
6/1/1995	1058.13	6/30/1995	1026.62	-2.98	-3.32	3.13	21
6/3/1996	1139.78	6/28/1996	1136.31	-0.3	-2.08	1.37	19
6/2/1997	1107.55	6/30/1997	1077.30	-2.73	-4.13	2.77	20
6/1/1998	537.60	6/30/1998	455.64	-15.25	-19.03	0.18	21
6/1/1999	742.70	6/30/1999	811.10	9.21	-1.81	12.07	21
6/1/2000	914.12	6/30/2000	833.37	-8.83	-12.82	0.25	18
6/1/2001	573.30	6/29/2001	592.99	3.43	-1.84	5.88	19
6/3/2002	741.90	6/28/2002	725.44	-2.22	-5.12	1.94	19
6/2/2003	672.92	6/30/2003	691.96	2.83	-0.42	3.41	20
6/1/2004	811.66	6/30/2004	819.86	1.01	-2.31	2.04	21
6/1/2005	861.05	6/30/2005	888.32	3.17	-0.26	5.22	21
6/1/2006	927.65	6/30/2006	914.69	-1.4	-4.78	0.83	21
6/1/2007	1348.36	6/29/2007	1354.38	0.45	-0.16	3.20	20

The records are pretty even with 7 winners and 7 losers. However, the average winning size is less than the average losing size.

KLCI Update

Some danger sign is appearing on the KLCI index. The rebound from 18 Mar has taken us from a low of 1166 to a high of 1305. The rally looks to be running out of steam.

The MACD cut below its signal line on 20 May 08. This suggests weakness in the short term.

The +DI has cut below the –DI line. The last time this happened on 20 Feb 08, the index went down from 1414 to 1173.

The index is also very near the base of the Bollinger Band. If it breaks below 1271, it will be bearish.

Let’s see whether the index can gather enough momentum to break through 1303. If the Bulls are able to push through this level, there will be another rally towards 1437

ASTRO Update (Symbol 5076)

ASTRO made a MACD Crossover on 22 Apr 08 and a trade was initiated on 23 Apr 08 with a buy stop order at RM3.46 and stop loss level of RM3.29.

This trade turned out to be a winner. ASTRO closed at RM3.82 on 14 May 08. That is a gain of about 10% within 15 trading days.

The price pattern made an inverted hammer yesterday. If the price goes below RM3.80 it will be suggesting weakness in the near term.

Both Stochastic and RSI indicator is reaching the top end which indicates that the stock may be reaching overbought condition soon.

MACD is still above its signal line so there is no sell signal from the MACD yet.

One approach will be to ride on the up trend and to take profit if the price falls below RM3.78.

KLSE Update

The KLSE index closed at 1286.54 yesterday. The 20 day moving average is showing a positive gradient and is rising since the beginning of Apr. This is a bullish sign.

The Bollinger is showing a slightly upward channel and the index looks to be moving towards the upper part of the Bollinger bands. If the index can break out of 1305 level, the uptrend will resume and the most likely target will be the Fibonacci Projection level of 1359.

The RSI has retraced back to the 50 level so that market is currently not in overbought situation.

The ADX is turning up and the +DI is greater than –DI. This implies that uptrend will most likely continue.

Pristine Swing Method

This is a method described by Oliver L Verez in his book, “TOOLS AND TACTICS FOR THE MASTER DAY TRADER”.

The method uses candlestick pattern and the relationship between the highs and lows of the price bar to determine entry points.

Entry Rules
1. Price made 3 or more consecutive lower highs
2. Price made 3 or more consecutive lower lows
3. Price made 3 or more consecutive black candle (closing price is less than opening price)
4. When conditions (1) to (3) are met, enter a long position at the high of the previous bar.

Exit Rules
1. Exit after holding the trade for 5 days.

Example of such a price pattern is shown below:

Lets apply this method to Digi.com Bhd (Symbol: 6947). Using data from 2003 to 9 May 2008, we have the following trades:

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Bars Held
5/18/2004	4.42	5/25/2004	4.5	1.81	5
10/8/2007	20.4	10/15/2007	22.6	10.78	5
11/26/2007	23.8	12/3/2007	25.75	8.19	5

Dow Update

The Dow Industrial Average closed at 12745 points, down 120 points. For the week, the index was down 313 points.

The index is now resting at the lower trend line of the upward price channel. It is also near the 50% Fibonacci Retracement level.

Next week will be a critical week. Let’s hope the index will be able to stage a rebound from current levels.

US Yield Curve

The yield curve is simply a ratio that is derived by dividing a long term yield with a short term yield.

For example, the yield for the US Treasury 3 month bill closed at 1.62 and the yield for the US Treasury 30 year bond closed at 4.66 on Tuesday. Therefore the value for the yield curve is 2.88 (4.66 divide by 1.62).

The steepness of the yield curve can be used to predict the performance of the stock market. This is because when the yield curve is steep, banks earn money by borrowing short term and to loan long term. The reverse happens when the yield curve is inverted or flat. Hence when the yield curve is steep, banks have every incentive to loan out as much as possible and to borrow to the limit of their reserves. And when that happens, there will be excess liquidity to drive up the stock market.

I have done a study by using the data from Yahoo (Symbol: ^TYX - 30 year bond and ^IRX - 13 week Treasury bill).



The trading rule is simple.

Enter
1. Compute the Ratio = (^TYX)/(^IRX)
2. If ratio crosses value of 1.15, enter a long position

Exit
1. Closed the long position after 12 months.

The trading result is as follows:

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Draw Down %	Max Gain %	Bars Held
6/2/1980	850.85	6/1/1981	991.75	16.56	-1.1929	21.1706	12
12/1/1981	888.98	12/1/1982	1039.28	16.91	-13.3861	21.3143	12
6/1/1982	819.54	6/1/1983	1199.98	46.42	-6.0473	51.8523	12
8/2/1982	808.60	8/1/1983	1199.22	48.31	-4.7762	55.9139	12
5/1/1990	2656.76	5/1/1991	2887.87	8.7	-11.7606	14.0656	12
9/4/1990	2614.36	9/3/1991	3043.60	16.42	-10.3295	17.3767	12
2/2/1998	7987.46	2/1/1999	9405.43	17.75	-7.6089	22.1845	12
4/1/1998	8818.50	4/1/1999	9825.29	11.42	-16.3157	15.1961	12
8/3/1998	8868.10	8/2/1999	10654.83	20.15	-16.7837	27.6667	12
10/1/1998	7749.42	10/1/1999	10335.69	33.37	-4.5118	47.4812	12
1/4/1999	9212.84	1/3/2000	11501.85	24.85	-2.3726	26.5482	12
4/2/2001	9877.16	4/1/2002	10402.07	5.31	-19.7448	15.7865	12
9/4/2007	13358.39	Open	Open	-2.91	-13.8464	6.8988	9

The trading result is not exactly spectacular but it is definitely better than return from fixed deposits.