Friday 29 Mar 2024
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UNITED STATES markets ended slightly lower on Wednesday as investors took profits after poorer performances by Microsoft Corp and Apple Inc. Microsoft tumbled as it posted its largest ever quarterly loss and offered a disappointing sales forecast while Apple fell after it reported quarterly iPhone sales trailed analysts’ estimates. The SP500 Index inched down 5.06 points to 2,114.15 points while the Dow fell 68.25 points to end at 17,851.04. 

In Malaysia, the FBM KLCI Index moved in a narrower range of 16.17 points for the week with lower volumes of 1.52 billion to 1.76 billion shares traded. The index closed at 1,722.44 yesterday, down 7.09 points from the previous day as blue chip stocks like British American Tobacco (M) Bhd, Genting Bhd, Hong Leong Financial Group Bhd, Petronas Chemicals Group Bhd and PPB Group Bhd caused the index to inch down on some institutional profit-taking activities. The ringgit was slightly mixed against the US dollar at 3.8045 as Brent crude oil eased to US$55.35 per barrel. 

The index rose on a rally from the 801.27 low (Oct 2008) to its 1,896.23 all-time high (July 2014) and it represents an extended Elliott Wave “Flat” rebound in a “Pseudo-Bull” rise completed. The next few months’ index price movements since July 2014 comprised key swings of 1,837.28 (low), 1,879.62 (high), 1,766.22 (low), 1,858.09 (high), 1,671.82 (low), 1,810.21 (high), 1,706.18 (low), 1,831.41 (high), 1,774.30 (low), 1,867.53 (high) and 1,685.03 (low).

All the index’s daily signals have turned mainly positive, with its CCI, MACD, Oscillator and Stochastic indicators showing “buy” readings. As such, the index’s obvious support levels are seen at the 1,671, 1,685 and 1,720 levels, while the resistance areas of 1,723, 1,738 and 1,795 will cap any index rebound.

The KLCI’s 18-day and 40-day simple moving averages (SMA) depict an emerging uptrend for its short-term daily chart currently. Temporarily, some upward respite has emerged from the 1,685.03 low of July 9, 2015. However, the recent price bars of the index are below the 50-day and 200-day SMA with a “Dead Cross”. This may not augur well for the index in the longer term. 

Due to the rebound tone for the KLCI, we are recommending a chart “buy” on Engtex Group Bhd. Looking at Engtex’s first quarter financial year 2015 (1QFY15) results, both its top line and bottom line was higher year-on-year in the same period. The improved profitability was attributed to the increased market demand for certain metal-related trading products and manufactured steel products. 

Going forward, Engtex plans to focus on expanding its existing product range for its wholesale and distribution division locally and abroad. They also will improve and optimise their operating capacity in its manufacturing division. As for the property division, it is expected to contribute significantly from the completed and ongoing projects in Selayang and the new property development project in Kepong.

A check on the Bloomberg consensus reveals that no research houses have coverage on the stock. Engtex currently trades at a very low and reasonable price-earnings ratio of 8.14 times. Its price-to-book value ratio of 0.88 times indicates that its share price is trading at a discount to its book value

Engtex’s chart trend on the daily, weekly and monthly timeframe is very firmly up. Its share price made a good surge since its major daily Wave-2 low of RM1.01 on June 17, 2015. Since that RM1.01 low, Engtex surged to its July 2015 recent high of RM1.32.

As prices broke above its recent key critical resistance levels of RM1.11 and RM1.22, look to “buy” Engtex on any dips to its support areas as the moving averages depict very firm short- to long-term uptrends for this stock. 

The daily, weekly and monthly indicators (like the CCI, DMI and Oscillator) have issued “buy” signals and now depict very firm indications of Engtex’s eventual surge towards much higher levels. It would attract firm buying activities at the support levels of RM1.11, RM1.22 and RM1.29. We expect Engtex to witness some profit-taking at its resistance areas of RM1.32, RM1.41 and RM1.44. Its upside targets are located at RM1.39, RM1.62, RM1.75 and RM1.95.


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 July 24, 2015.

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