KLCI trades in wider range

-A +A

AMERICAN stock markets ended mixed on Wednesday after the Republicans took control of the US Senate, allaying fears of drawn-out run-offs and raising investor hopes for more business- and energy-friendly policies. The S&P 500 Index inched up 11.47 points to close at 2,023.57 points whilst the Dow gained 100.69 points to end at 17,484.53. However, the Nasdaq edged down 2.91 points to 4,620.72.

In Malaysia, the FBM KLCI index traded in a wider range of 27.88 points for the week with slightly higher volumes of 1.68 billion to 2.87 billion traded. The index closed at 1,831.98 on Nov 6, down 7.31 points from the previous day as blue-chip stocks like AMMB Holdings Bhd, BAT (Malaysia) Bhd, Genting Bhd, Petronas Dagangan Bhd and Tenaga Nasional Bhd caused the index to decline on persistent profit-taking activities.

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 represents an extended Elliott Wave “Flat” rebound in a “Pseudo-Bull” rise completed. The next few months’ index price movements since May 2013 was 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), 1,802.88 (low), 1,896.23 (high), 1,837.28 (low), 1,879.62 (high), 1,766.22 (low) and 1,858.09 (high).

Most of the index’s daily signals have turned positive (except the Stochastic) recently. As such, the index’s key support levels are seen at 1,766, 1,800 and 1,828, whilst the resistance areas of 1,831, 1,858 and 1,896 would offer heavy liquidation and profit-taking activities.

The KLCI’s 18 and 40 simple moving averages (SMAs) depict a sideways trend for its daily chart. However, the 50 and 200 SMAs have also issued a “Dead Cross” and the index prices are still below these two longer-term SMAs. Therefore, the recent rebound from the 1,766.22 low is seen as a price rebound from oversold conditions.

Despite the sideways tone for the KLCI index, we are recommending a chart “buy” on MMS Ventures Berhad (MMSV). MMSV resumed its uptrend after it rebounded back to its recent 52-week high of RM0.62 from its sell-off to its mid-October 2014 low of RM0.38.

MMSV released its second quarter financial year 2014 (2QFY14) results at the end of August and is expected to announce its 3QFY14 results sometime this month. Looking at the results announcement, group revenue increased 31% year-on-year to RM11.5 million in 2QFY14 from RM8.7 million in 2QFY13 while net profit for the period rose approximately 64%. The improved profitability was attributed to more orders for machines from the LED industry.

A check of the Bloomberg consensus reveals that no research houses cover MMSV. This stock currently trades at a reasonable price-earnings ratio of 14.2 times while its price-book value ratio of 4.6 times indicates that its share price is trading at a large premium to its book value. The reported shareholding changes on Bloomberg revealed there was net buying from local investors over the past month.

MMSV’s chart trend on the daily, weekly and monthly time frames is very strong and is firmly up. Its share price made a great surge since its major weekly Wave-2 low of RM0.17 in May 2014. Since that RM0.17 low, MMSV surged to its recent November 2014 all-time high of RM0.62.

As prices broke above its recent key critical resistance levels of RM0.36 and RM0.51, look to buy MMSV on any dips to its support areas as the moving averages depict very firm short-to-medium term uptrends for this stock.

The daily, weekly and monthly indicators (like the CCI, DMI, MACD, Stochastic and Oscillator) have issued buy signals and now depict very firm indications of MMSV’s eventual move towards much higher levels. It would attract firm buying activities at the support levels of RM0.36, RM0.51 and RM0.61. We expect MMSV to attract minor profit taking towards its only resistance and all-time high of RM0.62. Its upside targets are located at RM0.68, RM0.82, RM0.89 and RM1.07.


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 November 7, 2014.