Weekly Technical Highlights (Week 15/04/19)

Profile stock list:

Might turn bearish:
1. Annjoo
2. Gadang
3. Gkent
4. IGBreit
5. Maybank
6. Pavreit
7. VS

Might turn bullish:
1. Homeritz
2. Penta
3. YOCB

In Side way mode:
1. CIMB
2. EWINT
3. Harta
4. JAG
5. L&G
6. Pohuat

1. Annjoo (Bearish)

- The price has been trending up since 1st of April, obviously, the price trend was created by short term technical traders.
- The price breakout the previous high resistance point at RM1.59 and continue to break the uptrend resistance line supported by high volume traded as market speculated on the ECRL news.
- The upward momentum has exhausted as profit taking started, doji appeared at the highest point, following by the evening star pattern. Short term bearish trend has initiated.

-Weekly graph, if the price cannot stay above RM1.725 for the following trading week, the trend will reverse. Next support line will be at RM1.65. 

2.CIMB (Sideway)

CIMB is still in a very bearish trend. Price closes below all MA lines. No sign of rebound. The latest trend is moving in side way with lesser volume traded. It is time to catch the bottom fish, we should monitor closely on the lowest point. A potential price rebound can be spotted with the rising of daily volume and the price does not make a new lowest low but closing higher.

3. EWINT (Sideway)

EWINT is still in side way trend. RM0.72 is a strong support line. Although the price does not break below the support line, but it didn't break the previous high . Resistance line is still unbreakable. Due to the Brexit issue and falling of UK housing price have threaten the EWINT businesses. 

"House prices are likely to continue falling for another six months in the UK and for the whole of 2019 in London and the south-east, according to an industry survey."

Same as CIMB, it is a patient game, we have to wait for the price rebound to come.

 4. Gadang (Bearish)

The price has touched the uptrend resistance line and bounced back. The trend has turned bearish recently. Selling pressure is still stronger than buying. We will see the first support line is at RM 0.70 following with the next support of RM0.676 under Fibo 0.236. If the major uptrend is still strong enough, the price will close at higher low and trend up again. Buy when it rebound from support line.

5. Gkent (Bearish)

This counter has extremely huge volume traded in a single day at almost a 4 times larger than the average daily volume. Usually this kind of trend, it is the third Elliot wave. Big fund is pushing up the price. Going forward, the big fund will dump the share and take profit. Recent candle sticks show signals of profit taking, selling pressure is higher than buying.
Right now, the resistance line has become the latest support line for the price, it will be more valid if price close and stay above for 3 trading days.
At this moment, not a good sign to buy in, it has high possibility to turn into bearish trend as price cannot break the highest point.

6. Harta (Sideway)

Harta is still in the bearish trend, but I reckon it is almost reached the end. Right now, stock price is moving in the correction waves.
Potential rebound if:
- price does not make new lowest point
- price breaks the previous high and closes higher
- manage to break the downtrend resistance line

7. Homeritz (Bullish)

Homeritz price has been dropping since early of Jan 2016 until today. This week, the price is breaking the 52 weeks lowest point record.
On weekly graph, it appears as doji candle. We will see whether the price can close with green candle pattern in next trading week.
Hopefully it can make a morning star pattern, then the stock will rally.

8. IGBreit (Bearish)

- The price has made the 52 weeks highest price. 

- Price almost reaches the resistance trend, while it does not have much volume to support it.

Hence, if the price cannot stay at the highest point for the following trading days, market will trigger sell down to take profit. 

9. JAG (Sideway)

The price is moving in side way trend. Major trend is still a bearish. The price is hard to move up with minimum trade volume. 

10. L&G (Sideway)

   

Same as JAG, price is moving in side way trend. Overall, market is still bearish. 

11. Maybank (Bearish)

Maybank price is moving in a descending triangle pattern. If the price breaks below the support line, it will have another major sell down by technical traders. 

Market sentiment is still weak on banking sector amid the potential interest cut by bank negara. Price closes below the bottom of previous solid red candlestick.

12. Pavreit (Bearish)

Pavreit price has made a new 52 weeks highest price record which is RM1.85 on 9th of April. But traders were trying to take profit on the following trading days. The price unable to maintain and break above the highest point and fall back. 

If the price falls below the support line, the uptrend will be ended. Price will either move in side way or down trend.

IGBreit trend might be similar to Pavreit.

13. Penta (Bullish)

Undoubtedly, the bullish trend is still strong and steady. Thanks to the bonus issue proposal. RM3.96 is the support line. Price has managed to stay above the support line for 4 trading days after the price has crossed above the uptrend resistance line. 

The coming trading week, I reckon that the price will go side way with some minor trending up.

14. Pohuat (Sideway)

Price movement is trading inside the inside bar tunnel. 

Support line: RM 1.50

Resistance line: RM 1.56

If the price cannot breakout both lines, it will move within the range.

15. VS (Bearish)

Ideally, VS should turn upward following the ascending triangle pattern. The strongest resistance line (RM1.09) was unable to breakout and go lower. Don't think there will be a uptrend.

16. YOCB (Bullish)

YOCB is currently moving in a side way trend. The trade volume has increased and the price is remain stable. This is the initial sign of rebound in the side way trend. 

MACD is going to make positive crossing in the following trading week as we can predict based on the shrinking histogram. 

CCI moves upward. Although it is still within the negative range, with that kind of momentum, I am sure it can move into positive by next week. 

We should see the price increases supported with the volume trade. 

Gadang: 6% profit hit!!

Gadang has reached the previous predicted price which is 0.735!

Annjoo (6556): Temporary Bullish? Or Brighter Prospects' Steel Player?

Following the release of ECRL progressive news, the entire construction industry in Malaysia has undoubtedly been boosted up by the mega project.
With reference of graph above, Annjoo, as a material supplier to the industry, is performing bullishly ever since the beginning of year 2019.

Recently, steel industries are not making good business, though.
This is due to most players are facing oversupply issues and therefore incurred of massive losses.

Retrace to year 2015, where local steel companies had a tough time when steel products from China spread and eventually flooded the local market.
In their financial reports we could find that the industry was stacking up their inventories during that period due to noncompetitive pricing.

In year 2016 and 2017, local steel companies experienced a temporary reprieve.
It was reported that, strong earnings arose mainly from higher steel prices.
Thank to China government's policy of withdrawing 100 to 150 million tons of crude steel making capacity over a period of five years to battle excess capacity problem in China.

Annjoo was especially outperformed over other local steel players.
The Group has successfully brought in hybrid blast furnace electric arc furnace which helped the Group to improve its cost structure vastly.
Upon investment in this new technology, Annjoo was easily became the lowest costs' steel producer across the region.

The reprieve ended after the government switched over in year 2018.
Local market demand has soften, due to weak market sentiment.
It has been reported that inventories started to pilling up again among local steel players.
Whilst, the Pakatan Harapan government on hold several large infrastructure projects, this were akin to pouring fuel on a fire over local steel companies.

The competition among locals became more severe when China-backed Alliance Steel (M) Sdn Bhd set up the country's largest steel mill in Gebeng, Kuantan with an annual production capacity of 3.5 million tonnes of long steel products.

"
The local steel industry is centered on two major types of products — long and flat.
Long products — including billets, bars, beams, iron bar, rebars and wire rods are used in the construction and civil engineering industries.
The major local producers of long products are Masteel, Ann Joo Resources Bhd, Southern Steel Bhd and Alliance Steel.
Flat products such as steel slabs, hot rolled coil (HRC) and CRC are mainly used as raw materials for downstream applications in the automotive, oil and gas, machinery and equipment as well as other manufacturing sectors.
To put things into perspective, there are only two major steel players operating blast furnaces currently — Alliance Steel and Eastern Steel.

Annjoo is adopting the hybrid blast furnace and BF-EAF (blast furnace-electric arc furnace) technology and Masteel is also scaling up its operations in line with the installation of a new technological package.

In general, a blast furnace is three times more capital-intensive than an electric arc furnace (EAF) but its steel-making cost composition including raw materials is about 25% lower than the latter’s.

A quick check on steel industry portal www.steelonthenet.com shows that the conversion cost for basic oxygen furnace steelmaking was US$327.56 per tonne in 2018, lower than EAF’s US$430.60 per tonne.

In a nutshell, a blast furnace will have a better competitive edge than an EAF in the long run.

Note that an EAF uses 100% steel scrap as a source, whereas a blast furnace uses 95% iron ore and 5% steel scrap.
Scrap metal and iron ore are commodities and their prices tend to fluctuate, depending on supply and demand as well as international trade policies.
Interestingly, scrap prices diverged from iron prices last year as the Chinese environmental clean-up gained momentum and Chinese mills were encouraged to use more scrap than iron ore.

Also, the 25% tariff on steel imports into the US — one of the largest exporters of scrap has buoyed scrap prices internationally.
US mills are able to pay higher prices for scrap due to high domestic steel prices.

EAF offers more flexibility when there is a need to reduce output sporadically. “A blast furnace has bigger capabilities but is less capable of shutting down in times of soft demand, resulting in huge inventory holding costs."
"
Source: https://www.theedgemarkets.com/article/cover-story-better-times-ahead-steel-sector

Based on the latest quarter report from Annjoo Q4 FY2018, the PBT has became thinner due to the decline in selling price and inventories written down, mainly attributed to the oversupply situation domestically.
Excluding the recognition of compensation recorded in this quarter, Annjoo is actually making loss.
Management has yet to come out solutions to counter the price war with Alliance steel.

Therefore, I believe the current price movement will be just a short term rally.

Gadang (9261): Rebound after the Long Retracement!

It has been in a downtrend since July'17 up to Dec'18.
However, the price has started to pick up in Q1 2019 and repeatedly tested the previous high point which is RM0.67.
It had once broke out from its resistance recently with an abnormal high trading volume, yet, it could not maintain the outstanding momentum and the price retraced and touched the latest support line.

After the long wait, finally, it has broken its resistance again today!
We should see whether it can standstill above the resistance point and fibo level of 0.236 which is around RM0.676 for three trading days.
If the price manages to stay above, since then, RM0.67 will become a strong support point in short term while.

Another good thing of Gadang is, the stock price is now moving above all MA lines.
It is definitely a sign of bullish!

The stock broke out of MA200; CCI is trending upwards; and MACD is making a positive cross.
Technical wise, the price is still moving through an uptrend triangle pattern.
Next target price will be the previous high point, which is RM0.735 (approximately 6% of return).

Looking through its background, currently Gadang has an outstanding order book of RM1.43bil, it shall provide a stable income few years down the road.
But I reckon the coming report of Q3 FY19 will not be too encouraging, as quarter of preceding year has recognised profits from completed projects from both construction as well as property.
Hence, the downtrend risk is still possible to happen.