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Friday, December 9, 2011

Small Capitalized Plantation Stocks (OSK)

BLD Plantation: On a firm uptrend. The stock is definitely one of the sector outperformers as is now trading above the 2008 high. Meanwhile, its price and relative strength are on a clear uptrend. In fact, the global market selloff in Aug/Sep did little to stymie its long term uptrend. The low in Oct was not only above the 2008 high but also above the 1H2011 peak. Based on its weekly closing, the stock closed at the highest level at RM7.09 last Friday, above the previous high of RM7.00. As another close above this level this Friday should confirm the breakout, look for the stock to continue on its uptrend. The price target is RM8.40 based on the stock’s sideways range for the past 5 months. The uptrend should continue as long as the important support level at RM5.60 is not violated.

TH Plantation: Triangle consolidation. TH Plantation is on consolidation since breaking above the 2008 high of RM1.85. This is also illustrated by the rising relative strength line since late 2010, as the September low is not below that of February, in contrast to the broad market. Nonetheless, the rebound is still within the 1-year old “Descending Triangle” consolidation. Note the negative bias from the “Triangle” resistance, but an upwards breakout is still in the cards due to the strong relative performance. An upward breakout, which could be confirmed by a close above the all-time intraday high of RM2.28, could see it testing RM2.68, as extrapolated from the base of the “Triangle”. A close below the RM1.85 support level will see the stock trade lower, and possibly consolidate sideways between RM1.40 and RM1.85, like in 2009 to 2010.

CBIP: Firming up. Although CBIP does not cultivate oil palm, its business is closely tied to the plantation industry. As such, its share price tends to move in tandem with the plantation stocks. It is also one of the more liquid stocks, which makes it a good exposure to the smaller capitalized plantation stocks. The stock underperformed the benchmark since peaking in 2008 but started improving from June 2010, as shown by the gradual rise in its relative strength line. CBIP is currently testing the 1-year-old resistance of RM4.40, and a close above this level in the next two weeks should confirm the early week breakout. Once this level is violated, the uptrend from early 2009 is expected to continue and the price target is RM5.55, a measured move based on the 2010 rally. A strong market may even see the stock test its all-time high of RM6.00. Support meanwhile remains at RM3.40, and only a break below it would change the stock’s trend.

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