A share price chart is a roadmap to show the direction of a share price. Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements. Like weather forecasting, technical analysis does not result in absolute predictions about the future. Instead, technical analysis can help investors anticipate what is “likely” to happen to prices over time. Technical analysis uses a wide variety of charts that show price over time.
There are a few patterns in chartings which all investors should know in order to make more money or to reduce losses. For examples, an up or down trending stock, an inverted head and shoulders, a cup and handle patterns and etc.
About 30 years ago, my wife and I attended a charting course conducted by Dr Neoh Soon Kean who was then a lecturer in University of Malaysia. He is the producer of “Stock Performance Guide” which gives you a brief summary of each listed companies in Bursa Malaysia.
For the purpose of this investment lesson, I will elaborate on the chart pattern of cup and handle.
On 10th August 2016, I posted the article “Gadang is showing a strong buying signal” when its price was Rm 2.50 per share. The chart was showing the formation of a cup and handle which is a strong signal for buying.
The price of Gadang closed at Rm 2.87 on 30th Aug 2016, a rise of 37sen, about 15% in 20 days. You better believe in Charts especially if the stock is supported by strong fundamentals.
You can see its annual profit of 40 sen per share as shown on its recent announcement in Bursa.
On 25th Aug 2016, the company made a multiple proposals, the details of which you can read from Bursa announcement. Briefly they are:
- Proposed share split
- Proposed bonus issue of shares
- Proposed bonus issue of warrants
- Proposed ESOS
- Proposed increase of authorized share capital
You must remember that giving out free convertible warrants is like giving cash to all the shareholders because you can easily sell the warrants. Moreover, the warrant price will go up in tandem with the mother share price because the conversion price is fixed.
Although I believe its share price will continue to rise, I am obliged to tell you that I have a lot of Gadang shares and I am not asking you to buy to support the share price.