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Thursday, December 22, 2011

Penny Stocks (OSK)

Denko: Uptrend. This stock is actually on a long-term uptrend, where its recent high in Sept was almost double the high of 2007, which is not the case for many penny stocks. Although the stock is undergoing correction since peaking in Sept, as illustrated by the 4-month downtrend line, its longer term uptrend is intact as it continues to chart a series of higher lows. In fact, it attempted to make a bottom in early Dec when a burst of buying saw it briefly touch the downtrend line intraday. Its pullback since then still bears a positive tone as it has so far managed to stay above 2 Dec “Hammer” low. A bottom will only be confirmed on a close above the Dec high of RM0.40 and a position can be initiated on a break here. Otherwise, an aggressive trade can be initiated now on anticipation of a breakout, with a stop loss being the “Hammer” low of RM0.33. The stock may trade lower if its stop-loss is triggered and a close below RM0.23 should confirm the end of the rally.

DPS Resources: Upward consolidation. The stock’s trend may have turned up after it spiked up in mid-Nov and closed at its highest in 3 years. It has naturally given up those gains in the past one month, but the stock’s upward bias remains intact as the recent low of RM0.145 is still above the 2011 low, and the contracting volume is also typical of an upward consolidation. However, the formation of a bottom is yet to be confirmed, as this requires a close above the Dec high of RM0.19. If the uptrend continues as expected, a position on the stock can be initiated. A close below the recent low of RM0.16 can be employed as stop-loss while a more conservative position can be taken at RM0.145. Look for the stock to
test the highest close of RM0.30 on a breakout; a strong move should see it retest the recent intraday high of RM0.40. However, the trade will not pan out should the stop be triggered, and it may take a bit longer for the uptrend to reassert
itself.

Poh Kong: Possible return of uptrend. The stock saw a buying surge in early Dec which could be a signal of accumulation, especially taken in the context of its longer term uptrend. Although the stock has been trending lower since Jan, the longer term uptrend is intact as the low of 2011 is higher than 2010, which in turn is higher than the low of late 2008. The stock has responded positively to the buying spike, first by staying above support level of RM0.40 and then gapping up last Friday. Thus a speculative buy can be initiated now on the expectation of uptrend with a stop loss on a weekly close below RM0.40. A conservative trade may wait until it closes above 6-month resistance of RM0.455. a measured move based on 2010 rally could take it as high as RM0.55 but do expect resistance at 2011 high of RM0.515.

Rimbunan Sawit: Still Consolidating. This is another of the penny stocks that is on a longer term uptrend. The recent high of RM1.00 was higher than that of 2008. The stock has been on consolidation for almost 2 months now, since peaking in early Nov. The contracting volume over the period also suggests a health consolidation. In fact, support may have been established at RM0.83 and the “Long Legged Dojis” of the last couple of days suggests that the support may well hold. A close above 5-day high of RM0.88 should confirm the return of buying and a position can be initiated on the breakout. A close on close below RM0.83 can be taken as stop loss. Price target is RM1.30, a measured move based on Oct-Nov rally but do expect strong resistance at psychological RM1.00. The trigger of the stop will invalidate the trade and strong support should come at RM0.67, the gap of early Nov and also the high of 2008.

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