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Will Pacific Century continue the long term uptrend after consolidation?

Will Pacific Century continue the long term uptrend after consolidation?

In the past 3 weeks, STI went up and tested the resistance at around 3465. This resistance is significant in that it is the highest point for STI since 2008. If STI manage to break out from this resistance, it is likely to have a very nice impulsive move thereafter and the market is likely to become quite bullish. However, after STI tested the resistance on 2 April, it did not manage to hold above 3460 and as a result, formed a potential false breakout pattern. There may be a sell down if the false breakout is confirmed for STI and it increases the risk for individual stocks as well as they are likely to be affected by STI. How to find opportunities in this kind of market condition? One option is looking for stocks that have not move much recently (therefore the risk for pull back is relatively low) but have the potential to go up strongly.

Pacific century is a candidate with relatively low risk that investors may pay attention to. From weekly chart, it can be seen that both Moving averages (personally I use 7EMA and 13EMA) and MACD histogram are indicating bullish signal, indicating that the stock is in a nice long term uptrend. From daily chart, it can be seen that the resistance at 0.325 is quite significant. However, the price managed to hold well right below it, indicating that the sellers are not strong. When STI suffered a sell down and dropped to around 3360 in mid March, pacific century managed to hold well, it is another sign of strength. If the price manage to break above the resistance at 0.325, the stock is likely to resume the uptrend and go much higher thereafter. In addition, since Pacific century did not go up in the past 3 weeks, the short term risk is relatively low. In case STI form a false breakout and have a pull back thereafter, this stock may not be seriously affected by the index.

Weekly chart:

Daily chart:

From fundamental perspective, both revenue and net income had gone up consecutively for the past 3 financial years. According to the full year report released on 12 Feb 2015, revenue increased 18% and net income attributed to investors increased 63% as compared to the previous year, indicating that the company continued its growth in the recent financial year. The PE of the company is only 7.4 and current price is only 0.98 times of its net asset value, indicating that it is not considered expensive according the well-accepted standard of fundamental analysis.

In terms of trading plan, one may consider to enter buy upon the breakout of the resistance at 0.325 (price reach 0.33) and expect the stock to continue the uptrend after the breakout. Once the uptrend is confirmed, the first target will be around 0.4. While if price does not manage to hold above 0.325 and come back below the support at 0.3, it may indicate the failure of the uptrend and those who bought may need to consider stop loss. By following this plan, the potential reward will be more than 2 times of the risk and makes it a sound trading plan.

Robin Han
Robin Han

Dr. Robin Han, a graduated from NUS with a Ph.D in Department of Chemical and Biomolecular Engineering, has been actively trading in Singapore stock market since 2007. His passion has let Dr. Robin to become a full time trader since 2010. He has extensively share his experience with his fellow investors on trading Singapore stock market using both technical analysis and fundamental analysis.

Dr. Robin is a regular guest speaker for radio 95.8 on financial program. He also has been invited by different companies and societies to conduct educational seminars on stock investments, including Shares Investment, Wealth Directions (Founder: Dennis Ng), Traders Round Table, SIM, Raffles Business International, Online trader's club and Alpha Alliance. He is also contracted by N2N (a listed trading software provider in Malaysia) as their overseas educational speaker in stocks.