Technical Analysis Of CIMB

I had the opportunity to meet Dato' Seri Nazir Razak last weekend and my thoughts went to CIMB and how its stock is performing.

For those of you who are not from Malaysia, Nazir Razak is the youngest son of Malaysia's 2nd prime minister Tun Abdul Razak and the brother of the current prime minister Najib Razak.

Interestingly he did his undergraduate in Bristol, the same city I did mine. Mine was at UWE Bristol, while his was at University of Bristol which is where he met his wife and they have been married for more than 25 years.

He has been the CEO of CIMB from 1999 to 2014 and has won a string of international awards from his stint as CEO. Currently he is still with CIMB but acting as its Chairman.

I'm telling you a little background as you will see later in the stock charts, it does had some effect on the stock price.

technical analysis of CIMB

The chart above is the daily chart of CIMB.

At this moment, the stock is still in a very nice uptrend. There is quite a lot of support below and therefore, it is very likely that the stock will continue to move higher.

There is strong support around the 6.80 area and if CIMB continues to stay above this area, it will be bullish for the stock.

The chart above is the weekly chart of CIMB.

Just like Maybank, it broke above a long term downtrend line and proceeded to move higher. Prior to that, the unusual volume had already hinted of a bullish move up as it represents strong buying interest as the stock bottomed.

I remembered last year I told one of my group members that CIMB will go up to 7.00. The reason for my bullishness was because CIMB was already in a daily uptrend. I told him about the 7.00 target because I saw the heavy amount of resistance around there that needed to be absorbed.

And true enough, the stock corrected after it hit 7.00. This correction is good because it helps to absorb the amount of resistance and supply from the congestion area on the left.

If the stock manages to stay above the support area I have shown you in the daily chart, then CIMB will continue its weekly uptrend. It may not be smooth because there are still quite some supply that needs to be absorb but at least it will grind higher.

The chart above is the monthly chart of CIMB.

Charts can sometimes be very interesting when you combine it with news and fundamentals. I do not know why charts worked so well but I have often found them to work very very well in important turning points in a stock.

As you can see, the stock formed a monthly descending triangle. Towards the 4th quarter of 2014, the stock broke down. That was when Nazir Razak stepped down as CEO of CIMB in September 2014.

It is as if the market was hovering at the support area and when he stepped down, the sell off started. Whenever a CEO who has taken a company to new heights step down, it can often send the shares of a company down. That's because investors might be uncertain about how the new CEO handles the company.

From the breakdown onwards, the stock fell until late 2015.

The stock slowly formed a smaller monthly ascending triangle. It shot up higher after it broke out of the ascending triangle. As you can see, the stock price has hit the 7.00 once and that helps to absorb some supply from the resistance area. There is still quite a lot of resistance at the 8.00 and 9.00 area that needs to be absorbed.

But as long as the stock continues its daily uptrend, I believe these resistance areas will be overcome. It won't be easy, so investors should expect rallies and then corrections and then rallies. As this will be the nature of stocks that need to absorb supply from the left.

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