After failing to find support at the 50 MA, Pentamaster has now drop to price support and is about to meet its rising 200 MA.
The support area is still holding and so far there is no danger to the uptrend yet. Long term investors usually remain bullish when the stock is above a support area and above the rising 200 MA.
To really get back into the stock, I would prefer for it to break the downtrend line. I would also prefer to see it form a double bottom as it hits the 200 MA and break above the downtrend line. That will be the most ideal. But I think one should not go and purchase this yet till it breaks above a a downtrendline.
Once it breaks the trendline, investors can purchase and put a stop loss below the lows of the support area.
Pentamaster is still in a very strong uptrend in the daily chart. The current correction might be a great buying opportunity for investors. Those who are already invested in Penta will find that this is a good time to buy more shares of the stock at a discount.
A stock that is in an uptrend does not move up non stop.
When you see a stock move up non stop faster and faster, it can be dangerous. This is what we call a parabolic move which in the end will collapse as fast as it rises.
A stock such as Penta that goes up and then corrects and then goes up again tends to be able to perform better in the long term. I have been bullish on Penta since last year and this stock has not disappoint investors.
The reason I was bullish is because Penta stayed above its rising 20 MA and 50 MA most of the time. This sounds simple but we are talking about a stock that is in an uptrend. Some things need not be so complicated.
If in doubt always remember the Wall Street saying. The trend is your friend until it ends.
This is an analysis that was requested by a friend. But I hope that you will also be able to benefit from this.
The chart above is the daily chart of Pentamaster.
First of all, the reason for the correction was quite obvious. At least to seasoned traders it was obvious. Whenever a stock forms a double top, you might want to check the indicators for a bearish divergence.
The MACD histogram and stochastics were showing very obvious divergence and this would have alerted some to take short term profits.
The stock is now correcting to a very strong area of support.
Whenever you see a stock correct to a strong area of support, most of the time it will be a great time to buy the stock cheaper. I'm not saying that any stock that corrects to support areas will bounce up. But the odds are usually in the favor of the stock going back up.
One of the things I like to do is to draw trend lines.
If Penta can break above the trend line I have drawn, it is very likely to continue to move higher.
When you look at the weekly chart above, you can see very clearly how the consolidation area acts as a very strong support. The stock is showing short term weakness in long term strength at the moment.
It is correcting to the area of support and usually investors can profit from it very well by buying the dips to the support area. If you really believe in Pentamaster's story and its fundamentals, then this is a good time to buy more of the stock cheaper.
It is very clear that if Penta stays above the consolidation area, it will have to go up. The path of least resistance will be up.
Let us now switch to the 60 min chart of Penta.
Once again, I must say that Malaysian stocks do offer the sharp eyed trader many short term trading opportunities. The recent 60 min uptrend provided continuation patterns to trade.
As with all stocks that rise, it will eventually correct. Currently, Pentamaster is still in a 60 min downtrend and it can be dangerous for the trader to buy.
But it seems to be showing some signs that it wants to reverse back up. If Penta can make a higher low and break above the trend line as well as the 60 min 50 MA, then the odds of starting a new uptrend in the 60 min chart increases.
When a new 60 min uptrend starts, the stock will most likely be able to break higher and make another new all time highs.
I won't be commenting on the newly listed Pentamaster in the Hong Kong exchange. There is too little data to do a meaningful long term analysis.
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Aug 14, 18 08:19 AM
In this lesson we will learn and examine why Pentamaster was able to recover all of its losses to start a new uptrend and achieve new highs.