Join Dstockmarket's Community - Daily Market Analysis, Individual Stock Analysis.
Technical analysis on Sapura Energy. Let's take a look at what the stock is doing from a technical point of view.
For some reason this stock is very popular in Malaysia. But since the last time I commented on this stock, I said that it is of no investing quality. The price was about 0.61 then and now it is 0.325. Anyway let's take a look at what the charts tell us.
A few months ago (see previous analysis), we saw how Sapura Energy tried to bottom by forming an ascending triangle pattern. Although it did meet the pattern's target, it failed to start a new uptrend.
Well, if you look at the chart below you will understand why this stock is still not of investing material.
The stock is still below its declining 200 MA and this is usually not a good sign for stocks. You might want to stay away from stocks that are below the 200 MA.
The weekly chart of Sapura below also tells us that the long term picture for this stock is still not very good. The stock is still in a long term downtrend. It is also below the weekly declining 50 MA and weekly declining 200 MA and therefore one should try to avoid this kind of stock.
You want to be on the lookout for a break below a weekly uptrend line. The last time the stock broke below a weekly uptrend line back in 2017, it had a sizeable decline. Sapura might be forming another uptrend line and therefore you might want to be careful if it drops below the recent uptrend line.
Rising oil prices has brought quite a lot of oil related stocks going up. Not only US oil stocks but also oil stocks around the world.
Sapura Energy was drifting lower until it formed a daily ascending triangle bottom.
As you can see, the stock broke out of the ascending triangle and currently has met its initial target. So those who bought the breakout have at least have a successful ascending triangle play. The declining volume as the pattern developed gave hints that this would be a successful trade.
Though we do not know how high it can trade short term, one good thing is the stock has managed to trade back above the 20 MA and 50 MA. Usually a sign of a trend change.
The stock has also made a higher low and that is something good. You will need to monitor if the stock can continue to make higher highs and higher lows to form a new uptrend.
For precision and short term gauge, the 60 min chart would be helpful.
The stock broke out of a 60 min ascending triangle bottom, shot up higher and formed a 60 min pennant. Currently it is still trading sideways and what you want to see is another continuation pattern.
Another stock that broke out of a 60 min ascending triangle bottom was Hengyuan.
Support will be at the pennant and as long as the stock stays above this area, then it is likely to go higher short term. Use the 60 min 20 MA and 50 MA as a guide. So far, the stock is still staying above these MAs and it shows that short term wise it is still healthy.
Sapura Energy has been in a downtrend for a very long time. Usually, a stock that is in a downtrend tends to go lower. The principle of trend following tells us that a trend in motion tends to stay in motion.
Therefore, when a stock is in a downtrend, it is wise for us to stay away from a stock until a new uptrend begins.
Well, even before Sapura Energy reported a full year net loss of RM 2.5 Billion, its chart was already telling investors the grim prospect of this company. You can read more about the loss in The Star's article Sapura Energy records full year net loss of RM2.5b.
Let's take a look at the stock chart of Sapura Energy.
Well, as you can see the stock has been in a downtrend for a very very very long time. Notice how each time the stock breaks below support, it helped to send the stock lower.
A stock that is in a downtrend goes down for only one reason. The financials of the company is not good. And by today, most people who read about the loss will agree that the financials are indeed not very good.
Recently the stock had a bounce up but today it broke below a short term uptrend line as it hit the declining 20 MA. Usually a stock in the US stock market that exhibits this pattern gets shorted with a stop loss put at the top of the pivot. So if the pattern have more follow through, you can expect lower prices.
What I do not like is the support once broken will now act as resistance. I have drawn the resistance area there as well. So in the event the stock manages to rally back up to that area, it might encounter lots of resistance there. This will make it hard for the stock to rise.
As the stock is still below its declining 50 MA and 200 MA, this tells us that the stock is not healthy in the mid term and long term. Therefore, investors should be extra cautious when thinking about investing in this stock. You want to wait for a change from downtrend to uptrend before even thinking about investing in this one.
A stock that is below its declining 50 MA and 200 MA is usually never a good stock. You can learn more about this in A Beginner's Guide To Trend Trading.
It is not surprising to see Sapura go lower. The trend is after all down.
Recently it broke below a consolidation and this send the stock lower.
One of the ways to know whether a stock's trend is down is to look at the price action. If it is making lower lows and lower highs, then this is a very expensive stock to invest in. It will keep going lower.
Another way is to look at the stock's MA. If the stock is below its declining 50 MA and 200 MA, then the stock is said to be bearish and therefore one should be really careful to bottom fish this stock.
The trend is still down and one should be bearish on this stock until it can go back above the 20 MA and 50 MA.
The chart above shows the daily chart of Sapura Energy.
Whenever I see a stock chart like this, I know that the odds of the stock moving lower is bigger than the odds of it moving higher. That's because the trend is down and a stock in a downtrend tends to go lower and lower surprising many people.
I have seen this happen in stocks all over the world. No matter what the nice headlines you read in the newspaper, there is certainly something wrong with the company when its share price goes lower.
In order for Sapura to rise again, we first of all need to see it trade above the daily downtrend line. This is usually the first sign of trend change. Perhaps the 905 M worth of contracts might help it. Perhaps it might gap up tomorrow. I don't know.
Sapura Energy bags RM905m worth of contracts (The Edge News)
You do not want to see it drop below the support area or chances are it will continue to move lower.
The chart above is the weekly chart of Sapura.
You can see that it is in a very bad downtrend. Which is why many investors who follow the trend lack confidence in this stock. For Sapura to begin a new long term uptrend, it needs to make a higher low and higher high in the weekly chart. Then it needs to break above the longer term trendline.
There is a lot of resistance at the 1.30 to 1.50 area. Therefore, investors should be cautious if the stock rises back to that area.
The oil and gas sector seems to have taken the Malaysian stock market by storm. With rising oil prices it is no wonder that these stocks are hot for trading.
Sapura Energy is one of those stocks that is in a serious daily downtrend. Again, I do not really recommend owning this kind of stocks. On the other hand, too much selling plus the bullish prospects in oil and gas stocks, especially overseas stocks, will usually provide a bullish catalyst for trading the stock.
This is a stock that I recommend trading but not investing in it.
For me, I still prefer to have people invest in strong uptrending stocks. Its easier to make money that way.
But anyway let's look at the technical analysis of this stock.
The drop from 1.40 to 0.70 was quite swift and this provided a tradeable void which allows astute short term traders to make some nice quick profits trading the oversold stock.
There are two significant areas to watch out for in the daily chart. The first one is the declining 50 MA which acts as a psychological barrier. And the second one is the price resistance which you can find at 1.40.
At this price of 0.975, if the stock manages to go up to even 1.30, it represents quite a lot of upside.
I think the best time to enter this stock was when it formed an ascending triangle in the 60 min chart. In order to determine whether this stock has firepower to move higher in the short term, let us zoom into the 60 min chart.
The chart above is the 60 min chart of Sapura Energy.
As you can see, the stock was trading below the declining 60 min 20 MA and 50 MA for a long time. Then the stock formed a 60 min ascending triangle bottom and traded back above the 20 MA and 50 MA.
The breakout of the 60 min ascending triangle was a good time to enter.
So, now the question is this...
Will the stock continue to move higher?
Well, I believe it is possible for the stock to move higher as long as it stays above the 0.85 to 0.90 area. This is where it formed some kind of flag pattern.
I also like to use the rising 60 min 20 MA as a gauge. So, as long as the stock stays above the 0.85 to 0.90 area and stays above the rising 60 min 20 MA, there is a good possibility of it moving higher.
For short term traders, you should look for continuation patterns in the 60 min charts for entry.
Jan 18, 21 10:34 AM
New chart lesson for the 3rd week of January 2021. Hope you can benefit from this.
Jan 04, 21 11:30 AM
In this week's chart lessons, we will have a look at bitcoin and other charts.
Dec 29, 20 07:47 AM
We should continue to be bullish on the S&P 500 as a weekly bottoming tail forms in this uptrend.
Dec 22, 20 09:27 AM
The SPX is still in a nice bullish uptrend, with it staying above the rising 20 MA and 50 MA.
Dec 15, 20 09:53 AM
December 14 2020 will go down in history as one of those moments where 2 sets of electors emerge for swing states in the US Presidential Election.