Breakout of the Laggards? - Wilmar, Midas, Tiger

Current Weekly Market Theme:
Market euphoria over partial resolution of the fiscal cliff is on the wane, with laggard and penny stocks in focus this week. 
Anything related to China's growth is still hot and up-and-coming. China's GDP was a tad above analyst estimates with the census department announcing an official 7.8%. While still higher than expectations, the dampener is the reluctant acceptance that China's growth will not be returning to the stunning levels we have seen in the last decade any time soon. 

[Previous post: Singapore Property Cooling Measures - Buy on Dip?]

1. Wilmar (China play; Palm Oil)

• Strong resistance in this week with increasing volume at ~$3.67. 2nd time in 9 months that prices have attempted to cross this level, with the first being unsuccessful in June.
• MACD - high positive divergence and trending into the positive
• RSI (25w) - crossing 50% on a steady upward trend
• Price to watch - $3.67 resistance line. Break out into the huge gap down region in Apr 2012 provides good buying reason that the worst could be finally over for this badly battered palm oil counter. With a successful break, expect TP $4.75 (~28% from breakout level) over the next 3-4 weeks.

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2. Midas (China proxy; rail; aluminium)

• Strong upward trend from 15 weeks ago that resulted in a breakout 3 weeks back. Straddling between the gap down region in Jul 2011, stock prices seem destined for the upper resistance region.
• MACD - increasing positive divergence and trending in the positive
• RSI (25w) - above 50% and seems headed for 70%
• Price Target - $0.61 (~19% from current levels) over the next 5 weeks. Expect the counter to take a short break next week for more accumulation opportunities given how much the stock price has already risen. On the long term (5-6weeks) outlook, the uptrend looks strong and there's no reason for news to drive the stock down given the resumption of railway investment in China.

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3. Tiger Airways (SEA growth; aviation)

• Breakout strongly this week with increased volume and trading attention.
• MACD - small positive divergence and trending into the positive.
• RSI (25w) - crossed 50%.
• Price Target - $0.81 (~5% from current levels) over the next 2-3 weeks. 
• The good thing about Tiger seems to be its slow and steady rise back into prominence after a terrible 2011-12 period that threatened its profits. New CEO with new marketing company does bode well to set the records straight to continue to overhaul the Tiger brand and put it back into the limelight again.

Weekly Update - of Stimulus and Steel

The market has turned pretty optimistic since ECB's bond buying initiative was announced last Thursday. In response, China also issued a stimulus packaged that was unveiled over the APEC meetings over the weekend that aimed to restart its national rail projects that were in limbo ever since last July due to the Wenzhou rail incident. 

Now, the flooding of money into this global malaise does seem to require some sort of concerted shake given the lengthy 'depression-like' conditions that the world has endured since 2008. Similar to the response in 2008, a flood of money from major superpowers would definitely give the economy a good boost in the short run in order to allow it to prop up and get moving on its own again. Cynics against the stimulus idea must surely take lessons from the 2008 crash that such a organised effort may will be required this time around. We must not forget that all talk but no action on the fundamental restructuring required for our global and local economies to get moving again is going to be a protracted process, cynically, may not even occur in time to come.

Then, surely, Mr Bernanke and his aides, after declaring and hinting that a stimulus package is not far-fetched in their latest Fed meeting minutes, will be putting together their pieces for a follow up to the week's actions. No wonder the market has been responding optimistically, rallying day to day. It is coming, after way too long.

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On a side note, steel play has clearly been dominant again with Midas, a steel producer with strong business foothold in China's rail industry. Its share price has already risen some 16% over the last 5 trading days on the back of very strong volumes. OCBC research has Midas at a TP of $0.435, which was just revised. Maybank just upgraded Midas to Buy with a TP of 0.48. Also, I had written a blog post over the weekend on my own analysis of Midas, with a TP of 0.45.

Steel play heating up? - Midas

Midas is a steel company that comes to direct consideration for more upside given the current resumption of rail development by the Chinese govt. It is a recovering stock that has seen a vast inprovement in its fortunes in the later half of thia year with impact expected in its 2013 FY earnings. It has sealed several successful contract wins over the 2nd half of the year as opposed to a very poor first half of 2012. In fact, a small table below has been compiled regarding its contract wins in 2012. There has been increased optimism too that it will be able to secure more rail contracts given the recovering China rail industry after the recent rail incident.

Midas contracts history for 2012 so far:

• 1 March Midas' JV Company Nanjing SR Puzhen Rail Transport Secures RMB526.9 Million Metro Contract
• 12 May Midas Secures Two Metro Contracts Worth RMB62.2 Million
• 2 July  Midas' JV Company Nanjing SR Puzhen Rail Transport Secures RMB860 Million Metro Contract
• 11 July Midas Secures New Contract Orders Worth RMB139.3 Million
• 14 Aug  Midas' JV Company Nanjing SR Puzhen Rail Transport Wins Two Metro Contracts Worth RMB1.4 Billion
• 3 Sept Midas' JV Company Nanjing SR Puzhen Rail Transport & Consortium Partners Secure RMB588 Million Intercity Rail Project
• 5 Sept Midas Strengthens Its Foothold In China's Power Industry With RMB123.4 Million New Contracts

Fundamental Outlook - Buy. It is clear that the Chinese government are indeed ramping up rail development once again after a hiatus from the Wenzhou railway incident 1 year ago. Let's not forget that it is in the interest of the Chinese government to link up cities and continue the economic boom, although possibly at a slightly lower pace from before. Nonetheless, resuming of the rail development business is definitely going to be a boon for Midas. 

On top of that, Midas is clearly diversifying in light of their recent troubles to restructure their business to also incorporate power. Their first contract of 2012 in the power industry has been secured in 5 Sept, a few days ago, to positive market acceptance. 

Finally, OCBC research also has a coverage on Midas with a buy call and a FV estimate of $0.41.

Technical Outlook - Buy. Chart is looking good with a breakout on 7 Sept on the back of news of 2 contracts being secured in the week. Not overly expensive either. TP ~$0.44.

• MACD - Has just turned upwards again and is in positive territory. Divergence also just turned positive when MACD crossed its signal line.
• RSI (25d) - Bounced off the 50% level and has some room to maneuver before the 70% levels.
• Bollinger Bands - Prices have just broken through the upper bollinger band to signify further upwards momentum.
• Breakout - A large white candlestick appeared on 7 Sept on the back of a breakout through the $0.38 major resistance. Expect this level to form good support for further challenging of the $0.44 levels for Midas.
• Volume - A huge surge in volume occured on 7 Sept accompanying the major white candlestick. 

The Stock Market Rally As Predicted - Midas, Mewah, Swiber

If you had been following my blog for the last 4 weeks, it is of no coincidence that the current market rally was about to unfold. 

On a technical analysis basis, weekly MACD of most stocks was slowing down in the negative direction, started to turn upwards and cross its signal line. The first positive call on the most iconic Capitaland came on 28 May that netted a return of 8.8% (check out that blog article here). That marked the start of the property bull when most of the property counters caught up with the Juggernaut's (Capland) rally in the next 2-3 weeks (check out blog article on the property bull run here). Finally, when big cap stocks like Kep Corp, F&N, Semb Corp, Semb Marine start to move, as they have done in the last 3-5 trading days, it is perhaps time to really declare this a bull run. 

However euphoric you may be reading this now, let's keep our excitement in bay because of the lessons learnt in the start of the year - when things become too overly optimistic. Is that the case now though? I do not think so as it is really quite a start of the rally. Yet, it is worth to pay attention to the divergence in prices of the large cap stocks as they are usually the ones that begin to signal the end of the run. Since Capitaland started this rally early, it is also probably the best indicator that we can use to gauge on the end of this run. For now, remember that entering now is probably 2-3 weeks late (from the really good traders) but do still enjoy the run. Reach your targets and enjoy for the year - healthy trading. 

Mewah is probably the only palm oil counter that has yet to go on an immense bull run that we have been engulfing the prices of Bumitama Agri, Golden Agri and Indo Agri. At the end of 2011, it had a price of ~$1, falling immensely to $0.37. Will it be able to see the 20-30% recovery in its prices as we have seen in that of its fellow palm oil counters (Indo Agri has risen a whopping 30% from its local low in May)? Right now prices of Mewah has already risen 15% from its local low in June.

Outlook - Buy; laggard play. Technical indicators are aligning to put this stock on a upward trajectory. Volumes are recovering, most notably today where a spike in buying pressure clearly appearing. Having performed less admirably compared to its fellow palm oil counters such as Bumitama Agri, Golden Agri  and Indo Agri, there is no reason not to expect this once-hot-counter to embark on a similar trajectory when traders start to feel the others have long overran their fundamentals.

• MACD - Is trending upwards for last 4 weeks for daily chart. Daily MACD just crossed 0 and headed strongly higher. Weekly MACD just crossed its signal line.
• RSI (25d) - Just crossed the 50% level.
• Bollinger Bands - Prices are riding along the upper bollinger band now with the bands clearly widening to accomodate for even more price volatility and possible uptrend.
• 20d MA - the 20d MA has just started to turn up, another positive sign that the average momentum has indeed left pessimism trailing. 
• 200d MA - Prices are still a good 8% away from the 200d MA as compared to most palm oil stocks that have prices already crossed the 200d MA. Undervalued much.
• Major white candlestick - and 2 smaller white ones for the last 3 trading days signify a much stronger rebound.
• Volume - A surge in volume occured today (3 July) accompanying the major white candlestick.

Midas announced a RM860 million metro contract today (3 July) that was very well received by the market together with market optimism that pushed its shares a whopping 5% higher. There has been increased optimism too that it will be able to secure more rail contracts closer to 2013 onwards given the recovering China rail industry after the recent rail incident.

Outlook - Buy; cheap play. Stocks dealing with basic materials have been a good recovery in the last 2 weeks with Sakari Resources already increasing a whopping 25%. In the US, aluminium and metal counters have similarly enjoyed a good run. 

• MACD - Is trending upwards for last 4 weeks for daily chart. Mild increase until today when MACD seems to be increasing more firmly and urgently.
• RSI (25d) - Just reached the 50% level.
• Bollinger Bands - Prices have burst the upper bollinger band now with the bands soon-to widen to accomodate for even more price volatility and possible uptrend. Nonetheless do note that there could be an anticipated take profit on 4 June (tomorrow) given the huge break from the upper bollinger line. 
• 20d MA - the 20d MA has just started to turn up, another positive sign that the average momentum has indeed left pessimism trailing. 
• 200d MA - Prices are still a good 12.9% away from the 200d MA. Potential for upside is high.
• Major white candlestick - accompanied another yesterday (2 June).
• Volume - A huge surge in volume occured today (3 July) accompanying the major white candlestick. Investor appetite for this stock is clearly increasing and has increased much over the last 1-2 weeks steadily.

Swiber was arguably the most battered down stock after the first-half-of-the-year rally. It recovered mildly after securing a host of contracts that extended its order book towards $1.5billion over the next 5 years. An impressive record for this company but the market has yet to firmly price its potential and brand in the oil & gas sector. Today its price finally broke $0.60 which was a local high in end June after euphoria on its slew of contracts. With more investor buying pressure, it seems that its fundamentals will soon be correctly validated.

Outlook - Buy. Still a 17% away from its year-start rally high (Ezion holdings is almost at its year-start rally price high for comparison) presents a good upside potential for this stock. In this sustained bull run, it is always a great idea to be vested in oil & gas counters. This is cheap, in a great sector, has strong fundamentals. All in for a good buy.

• MACD - had a blip over the last 2 weeks but is well supported on the 0 in the positive territory and is trended upwards. Weekly MACD has just crossed its signal line for more bullish break.
• RSI (25d) - Just reached cleared the 50% level.
• Bollinger Bands - Prices are touching the upper bollinger band now with the bands seemingly narrowing due to lagging calculations where the volatility of the last 14 days was pretty low. Not a great buy sign but given today's break in prices above $0.60 (around 5% increase from the 14d average), there is no reason not to believe additional volatility is back. 
• 20d MA - the 20d MA has been trended upwards with no signs of decrease. Strong upside.
• 200d MA - Prices have just crossed the 200d MA putting it in the likes of similar oil & gas counters of a bull rally time. Let's not forget that the other counters have prices already much above the 200d MA. 
• Diagonal major support - Prices are well supported on the diagonal as show in the chart. Risk reward is very healthy at current prices.
• Major white candlestick - accompanied 2 other in the last 3 trading days. Very positive uptrend.
• Volume - Steadily increasing volume has accompanied the last 3 trading days signifying much renewed buying pressure for this counter.

Midas and Tiger Exhibiting Strength with Major Supports

The market has been taking some profit-taking/correction/consolidation/volatility whatever you would like to call it. A few stocks have been catching my eye in this period of change - a refreshing one after an unexpected bullish of 2 months. They are Midas and Tiger. I quite particularly like the way they have tested the supports in this rally and am convinced that they are less risky plays in this supposedly continuing uptrend. At least, in any situation that the market turns, the stocks chosen will not break that easily.

Bullish short term. Midas has just broken out of a symmetric triangle or a pennant or whatever pro-pattern chartists call it. A white candlestick has appeared for the first time in 9 trading days. Volume has increased too. 

But, the price action is not without headwinds. First, it is still tracking below the 20d MA line so expect some resistance to come. Should the breakout and a cross of prices above the 20d MA, a more bullish uptrend is expected. For the conservatives, perhaps it would be better to wait for the cross over the 20d MA at around 0.40.

MACD histogram has been 2 days in green. MACD line is trending up and still in positive territory.

RSI has just crossed over the 50 mark and is highly healthy.

Watch. Tiger has been consolidating its prices for the last 1-2 weeks at around 0.80. Prices were also resisted strongly by the 200d MA line heavily for 4 trading sessions and possibly even til today. It is also heavily support by the 0.80 line so some sort of a triangle of trading boundaries is formed. A very narrow band of trading is occuring so expect a breakout soon.

Volumes have been low suggesting some sort of price consolidation and possible further uptrend in the breakout.

MACD histogram has been in red for the past 5 days. MACD line is trending down slightly but still in positive territory. Expect some sort of further retracement of the MACD.

RSI is slightly downtrending/flat but well above the 50 level.