Bulls Trying To Turn The Technical Corner

If you were to Google "Knocking On Heaven's Door," you would arrive at one of two links. The first would be a snazzy little Dylan ditty that's been covered by everyone from Axl Rose to Avril Lavigne. The second would be Friday's technology-led rally that juiced the tape to within spitting distance of resistance at S&P 1,405.

Here we are again, another critical juncture for the markets and those of us consumed with them. While technical analysis is a better context than catalyst, it assumes higher weighting in our metric mix when folks are confused and looking for legs to lean on. And make no mistake, there's no shortage of traders spun around these days.

Psychology has been reactive (bullish higher, bearish lower), fundamentals are mixed (buoyed by overseas sales and the weak dollar) and the structural imbalances have seemingly been absorbed by massive government intervention (whether or not the "panic phase" has been socialized away remains one of the more critical elements of risk analysis).

A quick sniff of the current landscape finds the DJIA and Transports trying to find footing on the other side of resistance (12,800 and 5,000 are the respective levels of lore). The S&P and NDX have yet to offer technical affirmation of the recent rally and the financials remain so far out of the game that we're left to wonder which way the ketchup will flow when the stars realign.

Over the weekend, Minyan Michael Santoli of Barron's offered food for thought on the year-to-date performance. He mused that if you're a fund that nailed the macro environment and identified the entire closet full of shoes -- from housing erosion to credit dysfunction to recession realization to the softening labor market -- you would have netted all of 5% in the S&P.

One of two reasons explains the relative traction: Either the muted downside reaction to news portends a sharp and snazzy rally -- one that will spark brilliantly once S&P 1405 is underfoot -- or government intention, coupled with the slack in the dollar, is masking disastrous imbalances that continue to build, fueled by policy and fed with complacency. Binary? In many ways, yes it is. Difficult? You betcha, on both sides of the ride. Impossible? Not on a bet, as volatility offers daily opportunities to those who trade with discipline over conviction. Sidle up to the edge of your seats, my friends, as this particular series of sessions promises to be chock full of nuts.

Gamuda (Bursa Malaysia: 5398)

Gamuda shares bottomed out above an extreme low of RM2.80 on 18 March before staging technical rebound which was capped at RM3.50 to fully cover the post election gap-down. A decisive breakout above this level on strong buying momentum is essential to fuel further upside towards RM3.80, where stronger selling interest should emerge.

The overhead 200-day SMA which is leveling above RM4.10 will prove to be a formidable ceiling. Immediate support is seen at RM3.10.

TRADING VIEW: SELL ON RALLY prior to profit-taking correction.

Malaysia Equity Strategy

Bottoming Out; Setting Our Year-end Index Target at 1,449

Bottoming-Out, Start Buying — In discounting the global equities meltdown, the market was hit by the shocking 12th General Election results where the ruling coalition parties lost the two third majority. A lot of the bad news is already in the price. In an illiquid market like Malaysia, we urge investors to start positioning.

Index Can't Fall Much More — Instead, we now expect the KLCI is set to hit 1,449 points by end-2008. Our bottom-up index target suggests 15% upside. Leading the pack is the banking sector, which accounts for 23% of the index weighting followed by plantations, telcos, utilities and gaming.

Limited Downside to 7.1% EPS Growth — Fundamentally, after three rounds of cutting, we see little downside to our 7.1% EPS growth estimates for 2008. While the worst is yet over for consensus, a few stocks have already fallen ahead of street downgrades. 2009 is set to be a better year with 11.6% EPS growth. GDP growth will be decent at 5.3% supported by strong domestic factors.

Valuation Looking Attractive — Malaysia is now trading at discounts relative to the region and its historical valuation benchmarks.

Imminent Catalysts — 1) Sentiment is too negative, partly caused by over-reaction to the spate of downgrades by the streets. 2) Some local institutions are seeing their cash levels rising to over 20%. We see buying activities picking up
imminently. 3) The upcoming 2009 budget could stir buying interest as investors
expect an expansionary budget to shore consumer confidence.

Upgrading Property as Value Emerges — Property stocks fell ahead of consensus
downgrades. After a 30-40% fall, we see value emerging. We have upgraded SP
Setia to Buy from Sell with a target price of RM4.90/share. We have also added
KLCC Property to our Top Buy list after falling 40% with a market cap of RM2.6b
against its RNAV of RM6b. We also upgraded UEM World from Hold to Buy.

Strategy: Add Beta and be Less Defensive — We are adding beta to our stock
selections by adding SP Setia, KLCC Property and UEM World to the list. We
continue to like IOI Corp, KL Kepong and IJM Plantations in the plantation space
but are dropping Sime Darby. Telcos is always on our Buy list. Small/mid stocks
like SapuraCrest and TA Enterprise should deliver str

Step by Step: Online Apply IPO

There are only few banks have the online Initial Public Offering (IPO) application services. This is the example for the Maybank.

First log in your Maybank2u account. There is a pane at the left hand side as show below. Select "eShareApplication",

follow step 1.



Step 2: Choose "IPO Application"

Step 3: Choose which IPO you want to apply. Example shown Dayang Enterprise Holdings Bhd.

Step 4: Click "Apply" to proceed.



Step 5: Click the check box.

Step 6: Click "I Agree" to proceed.



Step 7: Choose your race (there are quota for bumiputra and non-bumiputra)

Step 8: Key in your CDS account number. (15 numbers)

Step 9: Key in how many LOTS you want to apply.

Step 10: Click "Apply" to proceed.



Step 11: The final step, click "Comfirm" to complete the application.



After that you can print your application slip for your record. The money will automatic deduct from your account. This money will come back to the same account IF your application not choosen in the balloting.

The day after balloting date, if the amount go back to the account means the application not been choosen. If the money didn't come back, high possibility been choose. Partial amount come back, means partially given for the IPO share.

LCL (Bursa Malaysia: 7177)

The LCL chart are showing "on your mark" for the daily n weekly chart. The first target on breakout of this consolidation is about 6.75.

The only set back i see in the chart is the vol is rather low. Without follow through any good announcement will only encourage sellers to sell on
strength.

Sell Ahead of Further Weakness in the Medium-Term

The Bursa Malaysia market failed to follow-through on the previous week's strong gains, as increased uncertainties on the domestic political situation and sharp fall in plantation stocks dragged the benchmark Kuala Lumpur Composite Index (KLCI) lower, ignoring a mid-week rally in the US and the region. Week-on-week, the KLCI lost 36.43 points, or 2.9 percent to close at 1,221.98, with trading volume remaining light as most investors continued to stay sidelined given the uncertain outlook.

New spot month April KLCI futures contract traded on Bursa Malaysia Derivatives Bhd dipped 40 points, or 3.2 percent last week to settle at 1,220, reversing to a 2-point discount to the cash index, against the 1.6-point premium on the previous Friday. Profit-taking and selling post first quarter window-dressing caused a correction on the cash market and renewed short selling interest given the increased domestic political uncertainties.

The market began trading last week on a weaker note, as the previous week's gains for five straight days and concerns over potential for profit-taking and selling post 1Q window-dressing discouraged buying. A sharp rally on US stocks after major investment banks succeeded in raising capital to weather the worsening credit crisis lifted stocks in the region mid-week. However, the index only managed an early high of 1,264.75 before falling back, overshadowed by increased domestic political uncertainties following calls from certain quarters for a leadership change in the ruling coalition after the shocking defeat in last months general elections. The KLCI eventually fell to an intra-week low of 1,219.97 by Thursday, and then stabilized amid light bargain hunting which cushioned the index above the immediate chart support of 1,220 ahead of the weekend.

Sector-wise, plantation stocks were sold down significantly, after CPO futures prices tumbled towards the RM3,000 per tonne mark during the trough of a sell-off triggered by sharp limit-down moves on the CBOT US soybeans and soyoil market following a sharp increase in soybean plantings for the coming season. Construction, infrastructure and property related stocks with business operations in opposition controlled states also fell on concerns over potential delay in implementation of the projects by the current federal government.

On momentum indicators for the KLCI, the daily slow stochastics is falling steeply towards the neutral zone following last week's sell signal (Chart 1), but the weekly indicator remained flat at the oversold region. The 14-day and 14-week Relative Strength Index (RSI) indicators weakened further below the neutral mark to suggest further deterioration in sentiment.

Meanwhile, the daily Moving Average Convergence Divergence (MACD) positive signal line following the previous week's buy signal is flattening while the weekly MACD indicator is deteriorating deeper into negative territory, suggesting further medium-term weakness (Chart 2). The ADX line on the 14-day Directional Movement Index (DMI) trend indicator stayed in non-trending mode on contracting -DI and +DI lines, implying an extended consolidation.

Conclusion
Given the evidently weak technical momentum on the KLCI amid cautious sentiment,the Bursa Malaysia stock market should dwindle with a downward bias for high possibility to re-test the psychological 1,200 level. Technically, the falling 30-day SMA will reinforce immediate resistance from 1,250 (IR) with 1,265 (R1), last week's high, acting as next hurdle (Chart 3). Any bear market rally attempts to try and cover the post election gad-down from 1,278 should be viewed as better selling opportunity ahead of further correction ahead. On the downside, a break below 1,200 will fuel further correction towards 1,180, with a breakdown below the recent pivot low of 1,157 to enhance bearish momentum.

As such, while the market this week may stay range bound amid lack of positive leads, this could be a precursor for further falls ahead as technical momentum indicators failed to show improvement. Additionally, lingering uncertainty in the domestic political situation will prevent investors from returning to the market, thereby capping trading liquidity which is sorely needed to sustain a market recovery. Hence, investors should reduce exposure or look to sell on any counter trend rallies ahead of further weakness in the medium-term.

KNM Call

Look from the chart, KNM is most probably out of the bottom. It climb back to the 200 days moving average and seems start building a base there. MACD also turn positive and has cross over. Estimate it will rebound at least 50% to RM6.49.