A Great Commodity Run? - Olam, Noble, Sakari, Wilmar

Corn prices are hitting record highs; China's industrial production has been rocky lately fueling more chances of a stimulus that can restart the commodities consumption phase that led the 2008 rebound. We are seeing these bets on the badly battered commodities counters on the SGX that the next phase of the 2nd half of 2012 will be focused on stimulus measures which will lift the gloom on our current state of things. Counters such as Olam, Noble and Sakari have been leading a 1 week-old rally into strength, with some overcoming their highs set in late June/July. Wilmar has still been seeing strong selling pressure at close on Wednesday, 8 Aug despite the happenings around it.

The question looms - how to ride on this expectations-led rally? Let's take a look at the stock charts of the 4 mentioned stocks - Olam, Noble, Sakari and Wilmar.

  

Overall outlook

• It is clear that Olam seems somewhat a stronger stock with good buying pressure (albeit, possibly, artificially created from its recently announced share buy-back programme). 
• This can be seen from a higher July local low than its low in June. 
• An uptrend seems to be intact since it was so badly sold down in May.
• Both Noble and Sakari shown a W rebound to retake their early July highs. 
• Both Olam and Sakari are showing signs of a break above their July highs and have closed at around those prices.
• Noble still has some small room to go before hitting its July high.
• All three stocks Olam, Noble, Sakari are showing healthy RSI (25d) cross above 50% and MACD trending up with positive divergence.
• Wilmar still has some unrelieved selling pressure that has keep its prices firmly at $3.23 albeit with lower volumes of trading activity.
• RSI (25d) is around 30% levels which still make Wilmar an attractive proposition for bargain hunters. 
• MACD seems to be reaching a minimum point and turning upwards. Divergence turning positive soon (MACD cross signal line).
• In summary
• Olam
• Good uptrend observed but helped on by internal share buy-back.
• Challenging the 100d MA on friday (10 Aug).
• Noble group
• has not hit June/July high
• only 9.7% away from 200d MA.
• smaller market beta compared to other stocks = lesser volatility and profit.
• Sakari
• good upside potential of 25% towards its 200d MA
• has had a terribly good run so far with good increased volumes.
• Wilmar
• good bargain somewhat compared to the other few commodity counters
• +41.6% upside towards its 200d MA which is the highest among all 4 stocks. Even if its profit variance this time (the last announced quarter) was way off, it should have some risk management and smoothing in place to ensure that at least the 200d (and more) MA gives a good gauge to its future profit levels.
• note that selling pressure is not over so there is somewhat high risks involved in betting for a rebound

Weakness Lingers - Sakari, CapMallsAsia

Sakari Resources is a coal mining company based in Singapore with 2 mine operations in Indonesia. Since July last year, its stock price has been on a heavy downwards trend due to market weakness coupled with China's slowdown that has caused an even greater drop in prices lately. The raw materials FTSE index has been the worst performer YTD compared to other sub-indices and the STI index. 

Outlook - Go on short, break below 1.16 possible. Sakari prices broke through a major resistance diagonal drawn from June 2012 recently. It also just crossed the 20d MA line and headed for further downside. Stars are aligning for this stock to go further down together with even more market instability in the week ahead. Note that Sakari reports their earnings on 27 July Friday so perhaps the market is signalling/betting on poor results given the bad 2nd Quarter showing from China. Sell. 

• MACD - Has crossed the signal line and trended downwards with accelerating momentum.
• RSI (25d) - Is also steadily trending upwards towards 30% danger level.
• Bollinger Bands - Bollinger bands are widening again especially along the lower band signalling even further accommodation for volatility on the downwards side. Highly likely that prices ride the lower band down further.
• 20d MA - Prices have crossed the 20d MA strongly, further fueling the downside selling pressure. 
• Volume - The day price crossed the 20d MA, volume was particularly strong. 18 and 20 July had particularly strong volumes accompanying large black candlesticks = even more strong selling from the market.

CapitaMalls Asia had a fabulous run of late, increasing almost 18% from its May lows to close at ~$1.63 levels as with previous highs in Feb and Mar. Pretty impressive counter that has a solid balance sheet of increasing assets/long term investments over the last 4 years. High stockpile of cash that was recently (in 2011) used to acquire more investments which is pretty shrewd given the low valuations during that period. Stockpile of cash still remains pretty high at $930m as of 31 Mar 2011. Earnings, though, have been hit recently due to the sluggishly economy that has finally found its way eating a still solid track record of equity investments. Expect more decrease to come in this bulk contributing segment that is also pulled down by lowered operating income (though almost negligble compared to equities investment income).

Outlook - Sell. Stock has overrun its fundamentals and although it did a good job in the recent rally, its still-sluggish earnings will become apparent as it becomes more expensive. 

• MACD - Crossed signal line 3 trading days back and is headed downwards in accelerating fashion. Note though that MACD is still in the positive region so in a sense there is still some upward momentum that's lingering but fast disappearing.
• RSI (25d) - Is heading down to challenge the 50% level.
• Bollinger Bands - are closing up and prices are seen heading for the lower band
• 20d MA - a large black candlestick appeared last Friday (20 July) that crossed the 20d MA signalling further downside.
• 200d MA - Prices are around 15% above the 200d MA.
• Volume - Volume trade have generally increased at its peak price of ~$1.6-1.65 over the last 2 trading weeks. Possible sign of lacking impulse to continue further with many traders placing short bets or closing out of positions this time.