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Wednesday, October 19, 2011

AXIATA - An Outperformer (OSK)

Axiata has been on an uptrend since early 2009 as its share price has been making a series of higher lows since then. It is also one of the market outperformers, having more than tripled in price from the low of 2009. The stock’s outperformance is also clear in the chart, which shows that its relative strength line is scaling up. The market sell-off in Aug-Sept did little to hinder its outperformance. In fact, an alpha trade would have been at its most profitable early this week. The stock has continued to lead the market, breaking the month-and-a-half downtrend line with the latest high of RM4.89 and retracing exactly 62% of the Aug-Sep decline, which was a feat very few have achieved.

However, the stock is going through selling pressure in the very short term. Weakness is seen from the “Long Black” candle of last Wednesday, where the price gapped up only to close the gap at the end of the day, which is yet to be neutralised. This occurred right at the 200-day MAV line, which currently lies at RM4.88. The weakness is still unconfirmed, and requires a close below RM4.80, i.e. below the close of last Wednesday.

Selling from the current level is not necessarily harmful to the long-term uptrend. This is as long as the selling does not break below the support area at RM4.40-RM4.50, which is also a 38% retracement of June 2010-Aug 2011 rally. This should keep the uptrend intact and the share price may test RM5.80 if it breaks the RM5.15 resistance level. However, dropping below RM4.40 may see the current price trend turn weak, with support seen at the psychological RM4.00, near the high of March 2010.

(Chart posted with courtesy of ChartNexus)

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