On-Balance Volume

To answer the comment of Mr. Naruno Tony on MyEG's OBV, lets talk a little bit on OBV this time as I have nothing much to update my reading for the Dow and the FBMKLCI. The two options for both the indices remain the same.

On-Balance Volume (OBV) is a momentum indicator developed by Joseph Granville in the 1960s.

He used this indicator to look for accumulation or distribution of stocks by the 'smart money' (institutional investors). He believed that when volume increases sharply without a significant change in the the stock's price, the price will eventually move upward, and vice versa.

My E.G. Services Bhd (Rm 1.17)

For MyEG, the accumulation took 2 years from mid 2010 to mid 2012 followed by an OBV breakout and the stock started to run until GE14 on 9th May 2018. The OBV uptrend from 2012 to 2018 is just a normal trend with no sign of distribution. The uptrend during this period cannot be considered as accumulation, it just moved up in tandem with price. Usually I just let them run but will monitor closely for sign of distribution and use wave count to see where is the stock heading.

Then came the sharp drop with the change of Government on 9th May's GE14. After a 4-day holidays after the election, MyEG dropped limit down from 2.58 to 1.81 (-30%) on Monday and another limit down on Tuesday from 1.81 to 1.27. Finally it reached its low of 0.685 by 1st June.

Before the sharp drop there is no sign of distribution. Assuming the 'smart money' are still holding the stock (most probably they expected BN to win the GE14) and very likely they are the net buyer (have no choice) during the plunge. 

From June to August, the OBV moved with the price up and down, just a normal sign, no accumulation and no distribution. I would prefer to forget about that part of OBV before GE14 and start monitoring the OBV starting 1st June 2018. The 'smart money' will either have to find a way to push the price back to 2.58 or higher or they will distribute slowly by spreading rumours to manipulate the price to salvage whatever they still have.

To illustrate a good indication of accumulation lets look at Dnex.

Dagang Nexchange Bhd (Rm 0.40)

From 2011 to 2016 the 'smart money' is a net buyer for Dnex when it dropped from 0.40 to 0.20 (-50%)

Within 9 months from August 2017 to April 2018, the stock price was pushed from 0.20 to 0.66 (+230%) following an OBV breakout. From May 2017 to April 2018, the stock price dropped from 0.66 to 0.34 (-48%) but the OBV indicates that the 'smart money' are net buyers of Dnex.

When Dnex moved to 0.42 on 26th July, there was a small temporary OBV breakout to mark the end of sub-wave i. If my reading is correct, Dnex is forming its sub-wave ii at this moment. The next surge with high volume and another OBV breakout will signal the starting of sub-wave iii of wave (i) of major wave 3 of mega wave (3). I am not asking you to buy but technically this is what I have for Dnex.

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Weekly Update

Dow (25,451)

I have been paying too much attention to the 'hourly Chart' so much so that I saw only the tree and I missed the forest. 

Technically the wave B of major wave 8 can go as high as the top of major wave 7. The possibility of a big 8% to 10% pullback cannot be ruled out at this moment until Dow is well above the top of major wave 7.

The more bullish possibility that I mentioned on Wednesday is another possible option.

FBMKLCI (1,769)

If Dow were to go for a correction of 8% to 10%, KLCI will take the option of a mega wave (6) correction, completing the wave C of (6).

But if Dow were to move higher all the way from its current level, KLCI will take the major wave 5 formation.

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Dow - I may be wrong in my previous wave count.

Dow (25,414)

Dow added another 172 points on Wednesday and that has stretched my wave count for my hourly chart to the extreme for a possible wave B.

My previous wave count can still hold under only one condition, Dow must start to pullback on Thursday and must continue to move lower in the next few weeks by 8% to complete the wave C of its mega wave 8.

If Dow continues to move higher on Thursday, I will have to revise my hourly wave count for Dow.

Following changes to my 10-month chart.

And changes to my 10-year chart. If the current correction for Dow is over and if Dow were to move  higher from its current level, it means only one thing, Dow's mega wave 7 has NINE WAVES instead of five.

The pullback from its previous wave (v)'s high of 26,616 is the wave (vi) and since April, Dow has been forming the wave (vii) of its mega wave 7.

FBMKLCI (1,763)

If Dow's correction is over and if Dow were to move higher from its current level, for KLCI to move in tandem with the Dow, the more bullish option for KLCI that I have mentioned on 22 July can be the one. It is also likely that mega wave (5) may have Nine Wave instead of five.

So keep the fingers crossed and see whether Dow will continue to move higher tomorrow for the breakout to a new bullish scenario.

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MRCB - A big A-B-C-D-E mega wave (2).

Malaysian Resources Corporation Bhd (Rm 0.78)

MRCB is forming a very big 3-3-3-3-3 waves A-B-C-D-E mega wave (2). It will take easily another 10 years to complete this mega wave (2).

The recent uptrend is the wave (iv) of its wave C. There will be another drop, the wave (v), to below 60 sens again to complete the wave C.

After that it will take another 5 years or more to complete its wave D. And another 5 years for its wave E.

From the 2-year chart, MRCB at this moment is forming the minor wave iii of its mini wave 3 of wave (iv).

There will be another wave (v) down to below 60 sens to complete the wave C.

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Inari and Insas - Heading for new highs?

Inari Amertron Bhd (Rm 2.44)

Inari is forming its major wave 9. It has completed its mini wave 1, 2, 3 and 4 and has started forming its mini wave 5. I am expected nine mini waves for its major wave 9 to provide enough time for Insas to complete its major wave 5 as well as its mega wave (5).

Insas Bhd (Rm 0.92)

If Insas can move above the 92 sens level and continues to move higher, it will have its five uptrend waves to confirm its major uptrend direction in its major wave 5 formation.

If the mega wave (5) can gain 200%, the same as mega wave (1), Rm 1.80 can be the target price. 

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Dow may be heading for another 8% drop

Dow (25,058)

Looking at the 60-minute interval chart, there is a strong possibility that Dow has completed its wave B and has started its 8% wave C pullback.

FBMKLCI (1,754)

KLCI is either forming the wave (ii) of its major wave 5 as I have mentioned previously.

Or it is at the tail-end of its mega wave (6) that I have mentioned many months ago. I reconsidered this scenario because of its current pattern that shows that the side way movement since July 2014 can be a typical longer duration with smaller magnitude mega wave (6) correction.

But for both the scenarios KLCI needs to move lower first before starting its next uptrend to scale new highs. Since Dow is expected to drop around 8%, I guess KLCI and other major world markets will have to move in tandem with Uncle Sam for a more or less 8% pullback. It is possible that KLCI may drop around 8% to about 1,600 level. That can be a good entry point for longer term investor. 

Black shoes

Just a reminder to parents that are in favour of black shoes for their schooling children because of 'less washing', 'more time to study' etc. etc. Please pay attention to the foot hygiene of your children.

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Maszlee

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