In the US on Wednesday , markets inched up sluggishly, trading in tight ranges. The SP 500 index rose 5.62 points to close at 1,883.95 points while the Dow gained 45.47 points to end at 16,580.84.
The FBM KLCI traded in a narrow range of 19.25 points for the week with high volumes of 1.51 billion to 2.2 billion shares done. The index closed at 1,871.52 on Wednesday, up 12.18 points from the previous day as blue chip stocks like British American Tobacco (M) Bhd, DiGi.Com Bhd, Hong Leong Financial Group Bhd, Kuala Lumpur-Kepong Bhd and Malayan Banking Bhd caused the index to rise on some buying activities on Wednesday ahead of the Labour Day holiday.
The index 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 index’s price movements 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 mainly positive, with upbeat CCI, DMI, Oscillator and Stochastic signals. Its MACD is currently negative though. As such, the index’s obvious support levels are seen at 1,802, 1,852 and 1,871, while the resistance areas of 1,873 and all-time high of 1,882 will witness some very heavy selling activities.
Its simple moving averages depict an emerging uptrend for its daily, weekly and monthly charts. Due to its firmer chart signals, we believe investors will remain on a “buy on dips” tone for the KLCI.
Despite the upbeat tone for the KLCI for May 2014, we are recommending a chart “sell” for ManagePay Systems Bhd. Speculative penny stocks have fallen since April 28 and ManagePay was one of the badly affected stocks.
The company’s revenue for the fourth quarter ended Dec 31, 2013 (4QFY13) rose 75.3% year-on year to RM3.12 million from RM1.78 million in 4QFY12. The increase was attributed to the payment segment as the group had begun delivering credit card terminals for its Teksi 1Malaysia project.
A corresponding increase in profit before tax in 4QFY13 was also recorded from higher revenue and margins from the payment segment. A check of Bloomberg consensus reveals that no research house covers the stock. The stock is currently trading at lofty historical price-earnings rato of 140 times and at a high price-to-book value of 2.35 times.
ManagePay’s chart trend on the daily time frame is much weaker. Its share price made an obvious plunge since its daily Wave-5 high of 38.5 sen on April 25. Since that 38.5 sen high, ManagePay declined to its recent April 29 low of 19 sen.
ManagePay’s chart has moved into strong daily downtrends to its recent April low of 19 sen.
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As it breaks above its recent key critical support levels of 35 sen and 30 sen, look to sell ManagePay on any rallies to its resistance areas as the moving averages depict very firm short to medium term downtrends for the stock.
The daily indicators (like the CCI, DMI, MACD and Stochastic) are very weak and now depict the firm indications of ManagePay’s eventual move towards much lower levels. We expect it to attract heavy selling towards its resistance levels of 28 sen, 30 sen and 38 sen. It will attract weaker nibbling activities at the support levels of 0.7 sen, 0.9 sen and 1.9 sen. Its downside targets are now located at 16 sen and 0.3 sen.
Lee Cheng Hooi is the regional chartist at Maybank Kim Eng. The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgment or seek professional advice for your investment decisions. Technical report appears every Wednesday and Friday
This article first appeared in The Edge Financial Daily, on May 2, 2014.
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