Week In Review: 19 Nov 2017

Quick technical review of the main index and selected counters for week ending 19 Nov 2017. Strictly for illustrative purposes only.

FBMKLCI

  • Downside bias prevails
  • Immediate support at 1,716, whilst immediate resistance at 1,735
  • Oversold in RSI as well as trading below lower Keltner channel

FBMKLCI_19112017

Pantech

  • Potential pullback
  • Downtrend if breaks support at 0.61
  • Immediate resistance at 0.675, next at 0.705

Pantech_19112017.jpeg

Sapura Energy

  • In trading range
  • Immediate support at 1.38
  • Immediate resistance at 1.65, next at 1.75

Senergy_19112017.jpeg

Eupe Corporation

  • Potential pullback (however, not in oversold position yet)
  • May personally consider entry nearer towards 1.05, with potential stop loss @ 0.95 and target exit at 1.30 with reward-to-risk ratio of approx 2.50x

EUPE_19112017.jpeg

Astino

  • More likely to be a possible ‘failure test’ entry
  • Prepare to set strict stop loss at 0.82, with possible target exit at 1.06. Anticipate low reward-to-risk ratio

Astino_19112017.jpeg

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.

Betting On Fallen

Latest news – Shares of Sapura Energy tumbled more than 9% in early Thursday trade following report that Tan Sri Mokhzani Mahathir is disposing off his entire stake in oil and gas services company. This is the second time Mokhzani is offloading its stake in an oil and gas firm. In 2015, Mokhzani’s private vehicle, Khasera Baru Sdn Bhd sold off a block of 190.3 million shares in SapuraKencana Petroleum Bhd for close to RM820mil in total.

Industry players said Mokhzani’s exit did not come as a surprise. They added that Mokhzani believed the oil and gas industry was a global issue and prefers to redeploy his resources in other investments. 

Mokhzani through Khasera Baru has a 10.10% stake in Sapura Energy. According to a term sheet, Mokhzani is looking to sell up to RM905.1mil of Sapura Energy shares. The bookbuilding range for the offer represents 605 million Sapura Energy shares was between RM1.42 and RM1.49 a share.

The price range represents an 8% to 12.3% discount to Sapura Energy’s closing price of RM1.62 on Wednesday ahead of the bookbuilding launch. Khasera Baru will not own any Sapura Energy shares after the sale. 
Read more at http://www.thestar.com.my/business/business-news/2017/11/02/sapura-energy-tumbles-9pc-in-early-trade/#zLhAuhfLVUKh4pbF.99

My 2-cent thoughts – I am not surprised that Tan Sri Mokhzani will make an exit due to current political friction. Without zooming into the company fundamentals, is Sapura Energy currently in an oversold position?

Sapura Energy has always been a close proxy to the Brent (USD) (as shown in the graph below – since 1 Jan 2014):

SAPE vs Brent _2 Nov 2017.png

A simple regression analysis shows that there is a strong statistical relationship between SAPE and Brent (USD). The current share price of SAPE of RM1.48 is relatively lower than forecast share price of RM2.35 and is even lower than the 95% confidence interval range of RM1.65 and RM3.04.

Forecast SAPE.png

Scenario Analysis

Based on the regression relationship, the following is a simple sensitivity analysis of the SAPE share price based on Brent (USD):

Sensivity Analysis.png

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.

Waiting For Brent To Tank

Latest news: Oil is trading in bear market territory, with prices falling to their lowest level this year as rising supplies threaten to derail an effort by some of the world’s biggest producers to bring an end to a three-year glut. Renewed concerns about growing production from within the Opec cartel and a reinvigorated US shale industry took global crude benchmarks on Tuesday to the lowest level since mid-November with Brent crude sinking to $46 a barrel. Prices at one point during the session were down more than 20 per cent from levels at the start of 2017. A decline of more than 20 per cent from the most recent high is typically considered a bear market. Crude has now erased all its gains since late last year, when Opec and other producer countries, including Russia, agreed to cut output by 1.8m barrels a day for the first six months of 2017. A decision in May to extend the original six-month deal for a further nine months has not helped lift sentiment as a growing chorus of traders and analysts question the effectiveness of the supply curbs.

Price of Brent crude on Tuesday

Brent crude, the international benchmark, fell 89 cents, or almost 2 per cent, to settle at $46.02 a barrel, the weakest level since November 15. West Texas Intermediate, the US marker, dropped by 97 cents to a nine-month low of $43.23 a barrel, down by more than 20 per cent from a February peak.

Brent Graph.png

Two questions – (1) where is the bottom for brent? (2) what would you do when Brent tanks to the bottom? Continue reading “Waiting For Brent To Tank”