AMERICAN stock markets closed slightly higher on Wednesday amid optimism that the economy is showing sufficient strength to weather a global slowdown. November consumer confidence climbed to beyond a seven-year high. However, poorer durable goods orders, higher weekly jobless claims and slower new home sales dampened market sentiment.

The S&P 500 Index inched up 8.08 points to close at 2,072.83 points whilst the Dow gained 12.81 points to end at 17,827.75.

The FBM KLCI traded in a wider range of 36.13 points for the week with slightly lower volumes of 2.24 billion to 1.55 billion traded. The index closed at 1,829.91 yesterday, down 12.26 points from the previous day as blue-chip stocks like British American Tobacco (M) Bhd, Hong Leong Financial Group Bhd, Felda Global Ventures Holdings Bhd, Petronas Dagangan Bhd, SapuraKencana Petroleum Bhd and Telekom Malaysia 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 have been 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), 1,858.09 (high) and 1,805.35 (low).

All the index’s daily signals have turned positive recently. As such, the index’s obvious support levels are seen at 1,766, 1,805 and 1,827, while the resistance areas of 1,829, 1,858 and 1,896 would cap the index’s rebound.

The KLCI’s 18 and 40 simple moving averages (SMAs) depict a fledgling uptrend for its daily chart. However, the 50 and 200 SMAs have also issued a “Dead Cross” and the index prices are now between these two longer-term SMAs. Therefore, the recent rebound from the 1,766.22 low has obviously stalled at 1,858.09. The index’s trend does not appear to be very clear for now and remains trapped between the 1,766.22 and 1,858.09 levels at the moment.

Due to the uncertain tone for the KLCI, we are recommending a chart “sell” on Alam Maritim Resources Bhd (AMRB). Maybank-IB Research has fundamental coverage on AMRB. Our analyst recently released a review of the results in conjunction with AMRB’s announcement of its third quarter of financial year 2014 results. Our analyst has an unchanged “sell” call for AMRB with a RM0.80 target price. He sees a challenging environment in the offshore support vessels sector notably the small-sized anchor handling tug supply segment, which would be susceptible to weakness in daily charter rates in light of the weak oil price environment.

With a softer oil price being in line with the economics team’s forecast, our analyst takes the view that the sector derating will stay for some time following adverse headwinds and an oil price recovery back to its pre-October 2014 levels will not happen soon.

A check of the Bloomberg consensus reveals that eight research houses have coverage on AMRB. Of the other eight, there are four “buy” calls, three “neutral” calls and a single “sell” call. This stock currently trades at a reasonable price-earnings ratio of 11.01 times while its price-to-book value ratio of 0.94 times indicates that its share price is trading at a discount to its book value. The reported shareholding changes on Bloomberg revealed there was net buying from local investors over the past month.

AMRB’s chart trend on the daily, weekly and monthly time frames is very firmly down. Its share price made a massive decline since its major weekly Wave-2 high of RM1.46 in September 2014. Since that RM1.46 high, AMRB fell to its November 2014 recent low of RM0.78.

As prices broke below their recent key critical support levels of RM1.37 and RM0.99, look to “sell” AMRB on any rebounds to its resistance areas as the MAs depict very firm short- to longer-term downtrends for this stock.

The daily and weekly indicators (like the CCI, DMI, Oscillator and Stochastic) have issued “sell” signals and now depict very firm indications of AMRB’s eventual move towards much lower levels. It would attract firm selling activities at the resistance levels of RM0.81, RM0.99 and RM1.37. We expect AMRB to witness weak buying interest at its support levels of RM0.59, RM0.75 and RM0.78. Its downside targets are located at RM0.70, RM0.43 and RM0.14.
 

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 28, 2014.