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.

Sime Darby Bhd

The KLSE index staged a comeback for the week to close at 1246.79. That is about 2% rise for this week.

Sime Darby Bhd, one of the biggest palm oil producer closed at 9.10 on volume of 26.6 million.

The stock price reached a high of $13.4 on 11 Jan 2008 and set a low of $8.50 on 7 Apr 2008. The stock price has been affected by a decrease in palm oil prices which reached a high of RM4,204 a tonne on Mar 4.

Looking at the technical charts,


The ADX is turning down from high values which show that the down trend is weakening. The stock price will most likely move sideways. For reversal in trend, the +DI needs to cut above the –DI and the ADX value needs to be above 30 for a good up trend to resume.

The MACD line made a crossover on 28 Mar 2008. The low established on 7 Apr 2008 was not matched by a low in the MACD histogram. This is positive for the Bulls as MACD divergence usually mean the stock will move up in the near future.

With the Dow industrial average down 256 points on Friday session, the stock price may test $8.50 support line next week. Resistance is at $9.50.