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KepCorp: An Opportunity To Short On Rebound?
Trend Spotting | 06 November 2012
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By: Robin Han
Articles (102) Profile

As mentioned in the past few articles, I am bearish on the Straits Times Index (STI) and already shorted some stocks. Last night, the US market had a strong rebound momentarily, but even a good non-farm payroll report did not manage to hold US market at the rebound level on the same day. It was a clear sign of weakness. On top of that, according to the analysis I mentioned in the previous articles, I will still be bearish on the STI. For many weak stocks, I may consider shorting on strength.

Keppel Corporation (KepCorp) is one of the stocks largely favored by market participants. However, it has recently started moving downwards. From the weekly chart, we can see that the moving averages (MA) have crossed down (I used 7-day MA and 13-day MA) and the MACD histogram indicates that the stock has just started a mid-term down trend. It has also formed a double top pattern and it has also broken down the supporting trendline already. All these signals indicate that the downtrend is likely to continue for some time.

If we look at the fundamentals of KepCorp, its 3Q12 financial statement which was just released recently reported a decrease of 11.8 percent in profit regardless of the increase of revenue. The cash flow generated for operating activities has also been dropping for the past four years, and this is not healthy for a company.

In terms of daily chart, the MACD histogram indicates that the bears are generally stronger than the bulls in the past two months or so. The recent sell down was quite strong with volume peaking up. Therefore, the down trend is likely to finish very soon. Although it was good news that the company snagged a $160 million contract, the buying volume yesterday was not impressive. The rebound will be an opportunity to short on strength when price rebounds more than 38.2 percent. I will set my stop loss 1 tick higher than the resistance (which is the neckline of double top).

Robin Han is a Ph.D in Department of Chemical and Biomolecular Engineering and has got a solid foundation in the financial markets.

Please click here for more information about this author.

Keppel Corp  5.960 -0.01 -0.17%   
Business: [FY18 Turnover] Infrastructure (44.1%), offshore & marine (O&M) (31.4%), property (22.5%), investments (2%).

Insight: Apr-19, 1Q19 revenue rose 4.1% underpinned by high... Read More

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