Translate This Page

Friday, August 19, 2011

The Prequalified MRT Contractors (OSK)

Following our earlier analysis of the KL Construction Index, we now analyze some of the listed contractors that are prequalified for the KL MRT’s elevated portion as these stocks may see some shares accumulation ahead of the first award in December. In fact, the recent market fall could present an opportunity to collect the stocks for short-term trading as a spike in volume at price lows of some prequalified contractors can be taken as indication of such accumulation. Besides, some of the construction heavyweights such as Gamuda, IJM and MRCB have also mirrored last week’s long “Lower Shadow Line” in the KL Construction Index and these stocks will be in better position to rally on positive news.

Ahmad Zaki: A possible bottom. Ahmad Zaki’s share price is currently correcting the rally of Oct 2008 to Jan 2011. However, at the “Hammer” of last week whereby buyers eliminate the sellers’ earlier dominance, suggests that bottom is probably near. The share price seems supported at the RM0.70 level, which is the low of June last year and also a 62% retracement of the 2-year rally. The buying looked credible too as it occurred on high volume, the highest in 6 months. The weekly RSI suggests that the share is oversold too, as it is at its lowest since 2H 2008. A close above the “Hammer” high of RM0.735 today would be additional confirmation but the price needs to take out RM0.80, the gap of mid-July, before it can rally further. If so, first target is RM0.95, which acted as resistance a few times in the past 2 years, and then rally high of RM1.20. Based on a measured move, the share price may trade as high as RM1.50, where the potential award of an MRT portion should be a catalyst.

MRCB: False breakouts. MRCB has gone through a volatile 3 weeks with no end in sight. The share price is still on a long term uptrend, as demonstrated by the inviolate uptrend line. It seemed to have resumed its uptrend after breaking above RM2.35 - the 7-month resistance level - but only for it to fall back below. The resultant selling brought on a false breakdown. But the “Long Legged Doji” of the false breakdown could be positive for MRCB, especially as it occurred on the highest volume in the past 15 months. This high volume may suggest that the stock is moving into strong hands. A bullish confirmation is still required and that should come on another close above the RM2.35 resistance. However, consecutive closes below RM2.20 are likely to suggest that the current upward momentum is over and selling can be expected to intensify on a close below RM2.00.

Muhibbah: A double top. This stock is currently going through a correction but its price action last week indicates that buyers may have returned. It has been consolidation sideways since printing a rally high in Nov last year. The consolidation formed a “Double Top” pattern, and as the name suggests, this pattern usually occurs at the market top. The support level, or “Neckline”, of this pattern is RM1.40, and the share is expected to trend lower on a break below with a target price of RM1.00, based on the distance of the peak to the “Neckline”. The stock did just that, and after touching RM1.00, it rebounded strongly. Last’s week candle was extremely positive as the share price closed above the last 3-week high. The weekly RSI was also oversold, and is at the lowest since the 2008 low. Thus, we expect the stock to move higher but the “Neckline” should turn into a strong resistance. An award of an MRT portion may see this level break and first target will be the rally high of RM1.90 and if broken, possibly as far as RM2.70. However, expect the downtrend to continue on a close below RM1.15, and the share price may trade as low as RM0.80 should the RM1.00 support level be broken.

TRC Synergy: On an uptrend. This stock is one of the few that has been on an uptrend right up to July, in tandem with the main index. It has outperformed the broad market since Oct last year, possibly on anticipation of positive news. The stock wasn’t spared in the last market sell-off but it rebounded strongly after finding support at the one-year uptrend line. The share price opened near last week’s high and has moved higher. It is also above the important support and resistance levels at RM0.62. The weekly RSI is also positive as last week’s low was even more oversold than the March low. Thus a higher volume would be an added bonus. First target will be the all-time high of RM0.80, and if violated, the stock may trade as high as RM1.20. But look for selling to continue on a break below RM0.62, with further support at the March low of RM0.50. This will break the uptrend line and consequently turn the trend sideways.

No comments: