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Technical Analysis Of Gamuda

In this article we will look at Gamuda's stock chart from a technical analysis point of view. We will look at its trend, support and resistance etc...

Gamuda is another stock that was heavily influenced by the change of government. Cancellation of contracts and construction does have a negative influence on construction companies as future profits are deemed to have dried up.

Someone told me that construction business affects about 20 industries. So when mega companies like these are not doing well, you can imagine what the other industries will be doing.

February 20 2019

When we seek to analyze stocks that have gapped down a lot because of political issues, one should be extra careful. On the other hand, a gap down leaves a lot of empty space in between and since many stocks can and are able to close the gaps, it provides many trading opportunities.

If you take a look at the daily chart above, the stock has already closed the gap of the second gap down. A 50% return if you bought at 2.00 and the stock is now at 3.00. Not bad for a few months of waiting and buying when the whole world is scared. That is if you had the foresight and the guts to do so.

The question now is, will Gamuda continue to go up?

Will it have the ability to move back to the former highs in the 5.00 area?

The daily chart shows us that Gamuda has 2 box breakouts. The most recent one was a day ago. The boxes can be used for analysis purpose.

When the stock first consolidated to form the first box, it told us that nobody was really selling it anymore. That was the bottom. When it broke above the box, it told us that Gamuda wants to start a new uptrend.

The top of the first box is now a support area for the stock.

The top of the second box is also a support area.

The problem right now is the resistance area which I have highlighted in red. Very rarely does a stock shoot through the roof when there is a huge resistance area. (Unless the govt' suddenly announces a huge mega project for Gamuda). Then it might gap up heavily even to above the resistance area.

Since we do not have inside information, it is best for one to learn the art of support and resistance and trends.

Right now, Gamuda is approaching a resistance area and also the declining 200 MA. So there might be some difficulty coming in soon for the stock. It might need to trade sideways a bit to absorb the supply from the resistance before being able to move higher.

But opportunities abound. That is if one is hardworking in looking for them.

The chart above is the 60 min chart of Gamuda which offer us a reason why it shot up. First Gamuda broke above a downtrend line and that told us it wanted to go higher.

Then a 60 min ascending triangle formed. 

The stock broke out of the pattern and has now more than met the pattern's target. Since the stock is still in a 60 min uptrend, it could go higher a bit more. But once it starts to drop below the 60 min 20 MA then one should beware of a reversal.

Lastly, let us have a look at the monthly chart of Gamuda.

The massive drop came after it drop below a long term monthly uptrend line. A quick rapid massive selling occur after the election. But a monthly bottoming tail hinted of a bullish reversal.

Right now, the stock is reaching a resistance area that I have highlighted in red. The supply in this area needs to be absorbed before it can go higher. Well, perhaps a monthly reverse head and shoulders will do the trick.

I'm not sure how the script will run but if you see a monthly reverse head and shoulders you can be bullish bias and know that the stock can go back to its former highs.

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