Chart : Sumatec daily chart as of Oct 15 2014 (Source: ChartNexus)
Chart : FBMKLCI daily chart as of Oct 15 2014 (Source: ChartNexus)
The selling down of the past 2 weeks has caused the KLCI broke its 3 years uptrend line. The market has been running for last 3 years without any correction so I believe the Bull is tired and current weakness could just be a healthy correction which is in line with the world market. 1700 will be a critical support if it breaks then Bear may start to creep in.
But the same can't be said for certain penny stocks. Sumatec, the darling of the market, has seen breaking every level of support and almost reach the level before it spike. It is quite a classic pump and dump example. During the run up of the share price, there were a lot of 'good news', exciting corporate exercises, rumours and 'great prospect' flying around. These days forums, blogs, twitters and facebooks are all good platform for the promoter to spread the good news and how good is the prospect of the stock. With 'target price' of RM1, RM 10 and RM 20 couple with well known public figure as well as asset injection, it is quite enticing to retail investors. One might not believed it at first but when the share price keep going up,it is very hard to see yourself missing the boat.
The Aug 20 plunge of the stock price from over 60 sen to 40 sen was the end of the run for the counter. But the promoter was more careful when distributing their shares on the following weeks till today. The counter only closed one or two sen down most of the days with occasional rebound so there will be no panic from retail investors and they can keep distributing their shares orderly. At 40+ sen, there were a lot of investors that stuck with the high price went to average down and a lot of investors that miss the first run went into the stock as it deems 'cheap' at the time. I believe the promoter distributed most of their shares in this range as selling at the top is never their intention but distributing shares at the price that people are willing to support is what they are hoping for.
So what now? Some may still want to believe that it is just weak market sentiment and the share price will rebound to 60 sen or more. But deep down we know that when a stock doubled its share price in 2 months time and back to square one in the following 2 months then it most likely a classic pump and dump case just like the what happen to INGENCO, MTRONIC, NICORP, AGLOBAL (now rename as NEXTNAT) and PATIMAS (if you still remember this now delisted stock). For those who think that TSHS won't let his share just die like that, just like I mentioned in my previous post : Sumatec - What is the end game of TSHS? , I think the share price is nothing of his concern as he already cash out with the injection of his oil field. As for the RI, I believe we all know that the odd of it going through is pretty slim now.
Will the share price rebound to 60 sen or higher? Ya, everything is possible in this world but I think even 40 sen is quite a distance let alone 60 sen and above. Why? Because a lot of investors that get stuck with high price are looking to cut their losses at the first chance they have so there will be quite a selling pressure when the stock rebound. So God bless those still holding the baby!
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