A technical analysis view on Top Glove analyzing the trend and price action.
This is a stock that I have not look into for a very long time. Once a darling of the Malaysian stock market, Top Glove is now in a very bearish downtrend.
Many will be thinking if they should invest in this beaten down stock. So far, there is no end to the bearish downtrend that this stock is in. Recently it broke down below a descending triangle. This is a bearish continuation pattern and you can see how it proceeded to move down from there.
The stock is still below its declining 20 MA, 50 MA and also the 200 MA. Therefore the question of can we invest in this stock right now? We can answer with a definitive no.
One should never invest in a stock that is below its declining 50 MA and 200 MA. Never ever.
The weekly chart of Top Glove shows that it went through the 4 stages of the market. Basing, Uptrend, Topping and Downtrend. You can read all about it in the first article in this website.
Top Glove topped out with the classic double top formation and from there on it was all downhill. It is very typical of many Malaysian stocks, they climb up high and well and then the next thing you know they give it all up and you just don't know when it might go back up again.
Wow, another Malaysian stock that I have not had a look at for a very very long time. But compared to many other Malaysian stocks, this one has not drop as drastically compared to the rest. After a furious rise, this stock is meandering sideways from a long term point of view.
The chart above is the daily chart of Top Glove. Well, one look at it shows its really really messy. A gap down in July last year because of some legal proceedings with Adventa Capital brought havoc. But it was able to stay above the rising 200 MA.
The stock managed to rally higher only to form a second high near the previous high.
Some technicians call this a double top and it looks like the pattern is fulfilling what it says a stock will do.
By looking at the daily chart, there are a few negative things about this stock. Here they are:
Well, all this is not a very good sign for this stock.
Which is why we need to look at the longer term picture to see what is happening. So let us move to the monthly chart of this stock.
The chart above is the monthly chart of Top Glove.
If we look at it from 30,000 feet above the sky, this stock has performed very very well for investors. Since 2010, this stock has more than quadrupled. An amazing feat.
Thus from a long term investor point of view the zig and zag and volatility of this stock is perhaps a small thing.
One needs to understand that when a stock has gone up a lot, it is bound to have lots of volatility at some point. Whether this is growing pains or not we do not know. Or it could just be a rest before it goes higher.
The trading range from 4.50 area to 6.00 is the trading range.
I believe if the stock can stay above 4.50 area, then all this zig zags are just growing pains. Sooner of later the stock will have enough rest and began another round of uptrend just like what happen in mid 2017.
Hope this helps. And do supplement this technical analysis with your own fundamental analysis.
After running up quite a lot, this stock looks a bit toppy. I don't really like the fact that it has drop below the 50 MA which is usually not something that you want to see in a strong uptrending stock.
Whether this stock is just consolidating or topping we do not know yet but one hint is to watch the support area. If this stock drops below the support area then we can prepare for the start of a downtrend.
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