Saturday, February 28, 2009

One of the Darkest day for KLSE:KNM

I recommended before KNM is a worth buying stock because its current price is below its worth. But today marks one of the darkest day for such a recommendation. Let's face it straight flat to the face and see what happens ...

First of all, the support lines for KNM is 0.40 followed closely by 0.395 as shown in graph below.





KNM has been re-bouncing or more correctly lingering around 0.40 support line for quite some time. A lot of speculator are waiting to queue at 0.40 but never got their wishes come true. Until today and they regreted their wishes were granted. KNM drops all the way to 3.70

Why and What Happen ?
First of all, let's review what support lines mean. It means the price may bounce back up when it touches that level but if it break that level then it will fall much further. In KNM, there is no apparent next support line and it will go FREE FALL if it breaks 0.395 !! Which in this case, once KNM drops below 0.395, it goes straight to 3.70 !!



Why and What Happen ?
Actually the answer was anounced later at 6:17pm

7164 KNM KNM GROUP BHD
Notice of Shares Buy Back - Immediate Announcement

Date of Buy Back : 27/02/2009
Description of Shares Purchased : Ordinary shares of RM0.25 each
No. of Shares Purchased : 1,500,000 shares
Minimum Price Paid For Each Share Purchased : RM 0.370
Maximum Price Paid For Each Share Purchased : RM 0.390
Total Consideration Paid : RM 574,005.00
No. of Shares Purchased Retained in Treasury : 0 shares
No. of Shares Which Are Proposed To Be Cancelled : 0 shares
Cumulative Net Outstanding Treasury Shares As At To-Date : 40,135,100 shares
Adjusted Issued Capital After Cancellation : 0
Date Lodged With Registrar of Company :
Lodged By :

27/02/2009 06:17 PM

Ref Code: 20090227NI00515


Actually one could have detected this as early as 10:06am when a series of constant high volume sell transactions are done.




If you remember the concept of supply and demand, when there are more selling than buying, the price will drop. Especially when the buying pattern consist of many small lots but selling is done by a few big quantity ! This means some big shots are selling off this stock !

This can be further observed at 12noon, 2:50pm, 4:10pm, 4:30pm and 4:40pm.



The green color shows the price. The red color shows the sell volume and blue is the buying demand.

You may observe you can hardly see any blue in that graph. So its almost no doubt this stock is going all the way down !

What to do now ?

If you have purchased this stock and already lost more than 10%, the general rule of thumb is to cut loss now. However, if you do not have any other better choices/stocks anyway and if you believe the fundamental business of KNM is still strong then you may choose to hold on to another 15-20% lost. All purely speculation at your own risk.

If you haven't bought this stock yet, you will need to find out what the next support line is and prepare to buy it assuming no new surprising news.

btw, KNM will be giving out 1.5 cents dividen early March. 1.5 cents out of 0.37 stock price is 4.05% pay out, which is better than today's FD @ 2+ % ( see top right for latest best FD rate ). And you could have earn this 'annual' FD rate in just within a couple of weeks ! Which is equivalent to a 100% annual gain. But ofcourse, stick to 4.05% is a more realistic figure.

So a lot of small players will be accumulating this stock like mad but there is no clear signal what the big guy will do. Supposingly in this no-support-line condition, price will drop like no one's business. I even suspect there is some internal dealing for this downside so the risk is still high on this stock where speculation is more than fundamental analysis.

The best reason to buy this stock now is you don't care about the dividen and recent lost of projects, if you know you can keep it for 2-5 years, this is still a keeper !

me ? I am accumulating more bullets and hope to hit jackpot yes ....
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2 comments:

Father Sez said...

The stock still seems to be well below its 200 day MA. Does this mean anything to your article?

Wonder how the fundanmentals look like?

Regards

Michael Tsen said...

this stock's numbers are great, fundamental also looks strong, management is VERY responsive to any review and critics which is good.

The only thing to watch out for is .... everything seems too good. Which in this case is a 'valid' concern especially during recession.

so in this case, the fundamentals are good "but" ...

there will be a post about this dark side of KNM ...