Dow (28,653) - Tagged along with S&P and Nasdaq

It appeared that Dow was just tagging along with the record breaking S&P and Nasdaq, it has yet to set a new record high.

If Dow failed to break the upper tread line in the coming week, it is possible that Dow is about to complete its major wave 1.

But if Dow is able to break the upper trend line but unable to break its previous record high of 29,568, it will have to move south for a 15% pullback to complete its major wave 2 especially if S&P and Nasdaq start to take a pause after their respective records breaking runs.

However, if Dow can pick up momentum and can join S&P and Nasdaq in setting new record highs, it is possible that the current run up is not sub-wave v but is the mini wave 3 of sub-wave iii, a very bullish scenario.

FBMKLCI (1,525)

KLCI dropped sharply during the last 20 minutes of trading with very high volume during that last 20 minutes of the afternoon session on Friday. The following 5-minute interval 1-Day chart showed clearly what has happened. Until now I still don't know what is the reason for that plunge within 5 minutes.
 

With this sharp 29 points drop, I need to modify my wave count for KLCI.

It is more likely that since June, KLCI has been forming its wave (ii) and is about to complete the wave c of (ii).

Fintec Global Bhd (Rm 0.16)

As expected, Fintec announced a fantastic earning of 16.66 sens a share with net assets improved to 55 sens a share.

Fintec's revenue improved from its previous quarter of Rm6.2 million to Rm41.4 million due to the sale of short-term marketable securities. This improvement combined with the fair value gain of Rm128 million of its marketable securities contributed to the 100% increase of its earning from 8.29 sens in the previous quarter to 16.66 sens for quarter announced.

Now the focus will shift to the anticipated earning for the current quarter ending 30 September that must be announce by 30 November. 

Based on last Friday's closing price of all Fintec's investment holdings, the total fair value gain during period from 1st July to 28 August is an unbelievable Rm 909 million, 610% more than the Rm128 million just announced for quarter ending 30 June. Will this Rm 909 million improve further to above Rm 1 billion until 30 September? Or will the prices of all its investment holdings start to move lower during September? Great uncertainty, especially when the US presidential election is around the corner and nobody really know what Trump is going to do next with China, Russia and Iran and with the rising tension in the South China Sea.

Fintec is forming the sub-wave v of its wave (i) at this moment.

Gold (US$1,973/oz)

Gold looked very bullish. From the 40-Year Monthly chart, its is on the wave (iii) of its major wave 3 at the moment.

From the 4-Year Daily Chart, Gold has so far completed the sub-wave i-ii-iii-iv-v-vi and mini wave 1-2-3-4 of its sub-wave vii of wave (iii).

From the 5-week hourly chart, Gold has completed its mini wave 4 and has started its mini wave 5. For the mini wave 5, it has completed wave (i)-(ii), sub-wave i-ii and it is on its sub-wave iii now.

I expect Gold to move above US$ 2,000/oz very soon and all the gold related stocks are expected to move higher in tandem with the international gold price.

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Fintec Global Bhd (Rm0.155)

Fintec gained 1.5 sens (+10.7%) on Wednesday with volume of 149.8 million. Fintec is currently forming its sub-wave v. If the magnitude of sub-wave v were to be the same as that of sub-wave i of +100%, very likely sub-wave v will end around 23 sens. It is also possible that it may take the magnitude of sub-wave iii of +300%, then 46 sens could be the target (too optimistic?).

Fintec has been losing money for a long time in its main business of biotechnology products and services. However its technology incubation segment managed to turn in positive earnings since the second quarter of 2019, mainly from fair value gained (market value) of those listed companies under its incubation program. These companies are AT(S), DGB, Focus Dynamic, Mlabs, Netx and Vsolar. Besides these 6 listed companies, Fintec also invested in another 3 listed companies namely Komark, Secera and TNB.

Fintec's earnings since second quarter 2019 are as shown below:

The main contributor to the fair gained during each respective quarter is Fintec's 25.3% (517.2 million shares) holding in Focus Dynamics Group Bhd. The price of Focus at the end of each quarters are as shown below:

Fintec is about to announce its earning for quarter ending 30 June 2020. Based on fair value gained of Rm139.5 million, my estimate for the earning is about 12 sens a share with net assets at 60 sens. 

If Focus can maintain its today's price of Rm2.45 until 30/9/2020, the fair value gained will be Rm842.2 million, its earning can go more than 50 sens a share with net assets exceeding Rm1.00.

The only problem with earning from fair value gained is that this is only an accounting or paper gained. The moment Focus's share price collapsed, Fintec will report big losses in earnings.

Fintec-WB and Fintec-PA

Fintec closed at 15.5 sens today.

Fintec warrant B will mature on 12/4/2022. Its conversion price is 15 sens. It closed at 7 sens today. Premium is +42%

Fintec-PA (Irredeemable Convertible Preference Share) with face value of 8 sens will mature on 4/12/2027. Two Fintec-PA can be converted into one Fintec share OR one Fintec-PA plus cash 8 sens can be converted into one Fintec share. Fintec-PA closed at 7.5 sens today. Two Fintec-PA cost only 15 sens. One Fintec-PA + 8 sens = 15.5 sens. Zero premium. 

Fintec-PA rightfully can be viewed as a warrant with conversion price at 8 sens. When Fintec is less than 16 sens, it is more advantages to use two Fintec-PA to exchange for one Fintec share. The moment Fintec is more than 16 sens, it is more logical to use one Fintec-PA plus cash of 8 sens to exchange for one fintec share.

Based on the above argument, there is no reason to buy Fintec-WB at 7 sens (conversion at 15 sens) when Fintec-PA is available at 7.5 sens. In fact if one expect Fintec to move above 16 sens, it is more profitable to buy Fintec-PA especially when it is selling at half the price of Fintec.

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Dow (28,308) - Heading for new record high

Dow gained 378 points (+1.35%) on Monday, that is only 1,260 points away from its February 3's record intraday high of 29,568.

If the current run-up is the sub-wave v, very likely it will end around 29,800 level to complete Dow's wave (v) as well as its major wave 1. Major wave 2 is expected to have a 16.2% pullback to around the wave (iv) level of 24,971.

However if Dow can punch through the 29,800 level in a dynamic way with high volume of more than 500 million, then the current run-up is more likely to be the mini wave 3 of its sub-wave iii.

This is a very bullish scenario where sub-wave v may end somewhere around 34,400 level to complete the wave (v) with 37% gain.

This 37% gain for wave (v) will lead us to another outcome. As the wave (i)'s gain is 36%, wave (iii)'s gain is smaller at only 21% and wave (v)'s gain is higher at 37%. According to Elliott Wave Principle, the third wave in any five waves run up can never be the shortest wave, this implied that the major wave 1 will have nine waves instead of five.

 

Weekly Update

Dow (27,930)

Dow added 190 points (+0.69%) on Friday. Very likely sub-waves i-ii-iii-iv of wave (v) have been completed and sub-wave v has started.

 

A more bullish wave count is a sub-wave i-ii and mini wave 1-2 scenario with the next run-up as mini wave 3.

 

Gold (US$1,947/oz)

From the 40-year monthly chart, Gold is currently forming the wave (iii) of its major wave 3 of its mega wave (3).

From the 30-month daily chart, gold has so far completed the sub-waves i-ii-iii-iv-v-vi as well as the mini wave 1-2-3 of its sub-wave vii. The mini wave 4 has so far pulled back 6.2%, which is much bigger than the mini wave 2's correction of 4.5%. It is possible that mini wave 4 has ended too.

Mini wave 5 is likely to start next week with a possible target of US$2,340/oz to complete the sub-wave vii.

At this moment with my projected gold price to go well above the US$2,000/oz level, I guess I can drop the second possible option of an expanding triangle A-B-C mega wave (4) formation mentioned in my previous post dated 9 August as shown below.

USD/MYR (4.1725) - Malaysian Ringgit Gaining Ground

Malaysian ringgit has been strengthening against the US$ since May. 

During the Asian Financial Crisis (July 1997 - December 1998), Malaysian ringgit dropped to as low as Rm4.8848 to US$1.00 on January 1998. Since then the USD/MYR chart has formed a 5-wave wave A that ended on July 2011. It took another 5 years to complete a 3-wave wave B by December 2016.

From December 2016 to May 2020, wave 1-2 of its wave C.

 

From May's Rm4.3475 to US$1.00, ringgit has started to form the wave 3 of C and has strengthened to the current Rm4.1725 to US$1.00 level.

 

Within the next 10 years, by the time the wave C is completed, ringgit is expected to return to those good old days of Rm2.50 to US$1.00 before the Asian Financial Crisis. 

Most probably the strengthening of the ringgit in the next 10 years is due to the long term weakening of the US dollars caused by the US Federal Reserve continuous printing of dollars to finance the ever expanding National Debts.

At this very moment the reading on the US Debt Clock is $26,658,296,540,245.00

Click 'US Debt Clock' to check the current reading.

Bursa Malaysia - Starting of Another New Up-Leg ?

FBMKLCI (1,577)

KLCI added 17 points (+1.1%) on Tuesday to end the day at 1,577 level, if the index can continue to move higher on Wednesday by breaking the 1,580 level and continue to move away, possibility is high that today's is the starting of the wave (v) for the KLCI.

During this up-leg if KLCI is unable to break the upper trend line, it is likely to take the form of a diagonal (i)-(ii)-(iii)-(iv)-(v) to end its major wave 1.

But if KLCI can punch through its upper trend line, then the July's high is the sub-wave i and yesterday low is the sub-wave ii and today's candlestick is the first candlestick of the sub-wave iii. This sub-wave iii of wave (iii) is going to be dynamic and with high volume.

Gold (US$2013.55/oz)

Gold is currently moving above the US$2,000/oz level. From the 40-Year Monthly Chart, it is forming the wave (iii) of its major wave 3 at the moment.

By looking at the 4-Year Daily Chart, for the current wave (iii), it has completed the sub-wave i-ii-iii-iv-v-vi and it has also completed the mini wave 1-2-3-4 of its sub-wave vii. mini wave 5 of vii is in progress.

It is still a long way to go to complete the wave (iii) of its major wave 3. 

If Berkshire Hathaway of Warren Buffett has decided to move into gold mining stock recently by buying 20.9 million shares of Barrick Gold Corporation valued at US$564 million, I guess it won't be wrong in buying gold or gold stocks. 

In Bursa Malaysia, some of the gold related stocks have moved up very strongly with high volume.

The star is Mui Properties Bhd that gained 40%. It has a 40.37% stake in Nex Metals Explorations Ltd in Australia. On June 25, Nex Metals has reported spectacular drill results at the Kookynie Gold Project. The reports highlighted the high-grade and shallow nature of the mineralisation.

For the reports, click 'Kookynie Gold Project'.

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Bahvest Resources Bhd (Rm0.525)

Bahvest is an integrated aquaculture company involving in the entire process of sustainable aquaculture  consisting of marine fish breeding, hatchery, rearing, production of live feed, marketing, transportation of live fishes and distribution of fish products. Its main customers are from Hong Kong and China.

In 2017 Bahvest has diversified its core business into exploration and mining of mineral on a 317.7 hectare of land at Bukit Mantri, Tawau, Sabah through the acquisition of Wullersdorf.

In its 4th Quarterly report (January1 to March 31), gold production has dropped from its previous quarter of 123.96 kgs to 90.46 kgs due to the suspension of mining operation starting March 18 because of government's 'Movement Control Order (MCO)'. Its quarterly profit for its mining sector was Rm3.046 million but it loss for its marine sector due to MCO was Rm8.217 million plus a fair value loss of Rm151.553 million in its fishery stock. As a result its quarterly earning dropped into the red at -14.25 per share and net assets dropped to 10 sens a share.

Technically its price chart looks bullish. From its long term chart, Bahvest is currently on its mega wave (5).

After completing its mega wave (4) in March 2020, it has so far completed its wave (i)-(ii) and sub-wave i-ii by last Wednesday.

Very likely, Bahvest is forming its sub-wave iii currently.

Latest news

Weekly Update

Dow (27,931)

After a strong surge on Tuesday, Dow started to move side way to lower in the next 3 following days indicating a possible short term correction. There are 3 possible degree of correction.

First possibility is a sub-wave iv correction.

Second possibility is a higher degree wave (vi) correction, assuming major wave 1 is going to have 9 waves.

The third possibility is a 10% major wave 2 pullback.

FBMKLCI (1,564)

KLCI failed to move higher last week. In fact the market went into panic selling on Wednesday triggered by the heavy selling of glove stocks after the announcement by Russian President Vladimir Putin the approval for use of a coronavirus vaccine.

With Wednesday's low creating a possible mini wave 3, KLCI appeared to form a bigger wave (ii) with an A-B-C formation. Last Friday's 11.8 points drop could be the first candlestick of mini wave 5 of C of (ii).

AT Systematization Bhd (Rm0.09)

AT's proposed new venture into glove manufacturing, has a powerful surge on Tuesday to an intra-day high of 17 sens with fantastic volume of 1.09 billion shares. Its stock price was also affected by President Putin's announcement. Its Tuesday surge turned out to be a wave B instead of an anticipated major wave 3's run-up.

On Balance Volume (OBV) of Focus (Rm1.88) and Fintec (Rm0.115)

Focus is a fantastic stock in term of its share price appreciation. From its 2016's low of 2.5 sens, it managed to move to Rm1.98 last Thursday, a 7,920% gain over 4 years. 

From July 15 to August 13, AT moved from Rm1.22 to Rm1.98 for a 62% gain but not with high volume. Average volume during this period was about 3 to 4 million a day. I suspect Focus has already been cornered, there is no much free floating shares in the market.

Looking at the OBV pattern, it is possible that the stock accumulation was started as early as 2011 when OBV was at -ve 300 million. 8 years later by 2019 when share price dropped to 9.5 sens before it started to run, it OBV has reach 1.7 billion. Plus the -ve 300 million, the net OBV was 2 billion. AT's total number of shares is 2.044 billion.

Fintec is holding 25.3% or 517 million Focus share worth Rm970 million at Friday closing price of Rm1.88. Fintec has a total of 1.356 billion share and another 664 million Fintec-PA that can be converted into 332 million Fintec share. After conversion, Fintec will have 1.688 billion shares. 

Going through the OBV of Fintec, there was no sign of stock accumulation until March 2020 when Fintec reached its low of 2.5 sen. Within 4 months by early August, OBV has reached 2 billion, very fast indeed when compared its 4 months to Focus's 8 years of accumulation to reach 1.7 billion.

My main question is whether Fintec has been cornered by now?

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AT Systematization Bhd (Rm0.12)

AT gained 2 sens or 20% to 12 sens on Monday with very high volume of 612 million. 

AT at this moment is on its major wave 3. Even though it has not yet moved higher than its June's high of 16 sens, but its OBV has already broken out of its previous high. An OBV breakout indicates strong accumulation and is often followed by a price breakout.

After the market closed, New Straits Times published an article on 'AT diversifies into glove manufacturing', click the headline for the article.

In fact on July 1, AT has informed Bursa Malaysia Malaysia of its proposal to acquire the entire equity interest in Pear Glove (Malaysia) Sdn Bhd. The acquisition is expected to be completed before end of September 2020.

Gold (USD2,036.15/oz)

Since my last posting on gold one month ago on July 9, when gold price was at USD1,806/oz, gold price has gained another 15% to an intra-day new record high of USD2,078/oz on last Friday before closing at USD2,036/oz.

At this moment gold is about to complete its wave (iii). If the next pullback is around 10% for its wave (iv) formation, gold will continue to move higher to form the wave (v) of its major wave 3.

But if the coming correction is more 10%, I wouldn't be surprised that gold is heading for an 'expanding triangle A-B-C' formation for its mega wave (4) as shown below. For this scenario, gold price can go to as low as USD1,000/oz before going up again for its mega wave (5). Wave C of (4) may take about 5 years to complete.

Momentum-driven market due to excessive liquidity

Following a massive sell-off in March as the Covid-19 pandemic swept across the whole world, global markets have been surging despite disastrous economic consequences. It appeared to me that markets are purely driven by excessive liquidity, speculation and the momentum created by some situational sectors and stocks. At times it appeared a little bubblish. 

FBMKLCI (1,578)

Bursa has a broad-based retreat on Friday. KLCI dropped about 10 points with record volume of 27 billion. Losers out-numbered gainers by 794 to 435.

Based on its long-term chart, KLCI has been forming its mega wave (7) since setting its low of 1,219 in March 2020.

From its 19 March's low of 1,219 KLCI has gained about 30%. At this moment KLCI is forming its sub-wave iii of (iii) of its mega wave (7).

Dow (27,433)

Dow managed to move above and stay above 27,000 in the last few trading days to further enhance its bullish scenario. Dow is at its sub-wave iii of wave (v) in its mega wave (3) formation.

EG Industries Bhd (Rm0.615)

EG encountered heavy profit taking on Friday. It dropped 7.5 sens or 10.8% to Rm0.615. Based on candlestick, EG was on its wave (iii). If EG continues to move lower next week, then its last Tuesday high of Rm0.83 marked the end of the mini wave 5 of its wave (iii). EG is likely to drop to Rm0.52 to complete its wave (iv).

But if EG can move higher next week, then the Friday sharp drop to 61.5 sens is the mini wave 6, wave (iii) will have 9 mini waves under this condition. Wave (iii) is likely to end around Rm1.20 or 270% (1.618x167%=270%).

EG's Monday movement is crucial to confirm whether its wave (iii) has already ended Rm0.83 or it will end much higher at Rm1.20. 

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Fintec Global Bhd (Rm0.13)

Fintec is a Malaysia-based biotechnology, technology incubation and portfolio investment holding company. It is one of my favorite stock and I have mentioned this stock several time before.

Fintec is the second most active stock on Wednesday with 622 million share traded, the volume changed hand represent 46% of its total number of paid up share of 1,339 million. It gained 3 sens or 30% to close at 13 sens.

The most active stock is Vsolar with 689 million share traded. Fintac is holding 14.32%  of Vsolar.

Fintec has invested in many listed Malaysian companies that include TNB(0.01%), Komark(19.82%), Seacera(12.52%), Focus (25.02%), Vsolar(14.32%), AT(S)(28.29%), Netx(7.56%), DCB(7.37%) and Mlabs(11.2%). Its holding in these companies at today's closing price is worth Rm964 million or Rm0.72 per Fintec shares.

Fintec most valuable investment is its 25.02% holding in Focus. At Focus current price of Rm1.68, this stock has appreciated in price by 1200% in the last two years. During the same period Fintec's price has appreciated by only 85.7%.

The wave count for Fintec is as shown below. It is currently forming its sub-wave v that is likely to end either around Rm0.22 or Rm0.275 (my estimation).

For its last quarter ending 31/3/2020, Fintec EPS is 8.29 sens mainly from the fair value gained for its investment holdings. Net assets is Rm0.51. For the second quarter ending 30/6/2020, its estimated EPS is around 10 sens mainly from fair value gain and with net assets at Rm0.61 per share.

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