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Revisiting G-Love

In order to rally higher, the share price will need to make a healthy retracement/pull back. A pull back in share price after the rally, indicates profit taking activities by short term traders & scalpers. Thus when the share price breaks higher in future, it encounters lesser resistance as the profit taking already taken place.

After a long weekend break, the KLSE market is actively traded on Tuesday with a total traded volume of 6.392 billion. Healthcare sector attracts strong trading interests, notably Glove Manufacturing companies. Among the top 10 gainers, 6 of them are Glove Manufacturer (TOPGLOV, COMFORT, RUBEREX, SUPERMX, KOSSAN and CAREPLS)

Top 10 Gainers for 12th May 2020.

Despite an ongoing rally on Glove sector, M+ Online had indicated there was further upside on glove companies in our previous video dated 21 February. To view the video, below is the link:
https://www.facebook.com/mplusonline/videos/472436726972547/

Share price of glove companies are mostly higher now as the demand for glove has significantly increased during the Covid-19 pandemic. How do we trade all these glove stocks that rallied and still moving higher?

Trading Uptrend Stock

To trade uptrend stock, we can use one of the M+ Wiz’s rules – Buyers Intact. “BUYERS INTACT” detects the stocks that are moving on an uptrend and continue to trade higher. It will be triggered when the price traded higher than previous closing, mostly active in morning session.

This strategy is suitable for momentum traders and scalpers who interested to trade along with the continuation rally in the share price. 

Glove companies been triggered many times since 9.00am opening

How to Decide to Buy or Not to Buy?

We will identify it as a high potential setup if it meets following conditions on its 30-min chart:

  1. Price is going on an uptrend, preferably had a strong up move
  2. Rally in price comes along with the uprising in trading volume
  3. Mild profit-taking on post rally
  4. Retracement in the rally comes with a lower volume

Examples as below:

  1. Price going on an uptrend
Price is above 60-periods EMA and had a strong upward move previously.

To determine whether is going on an uptrend or not, a simple way is to include 60-periods Exponential Moving Average (EMA) on the 30-minute chart. If the price is above 60-periods EMA, we would recognize it as uptrend. Likewise, if the price is below 60-periods EMA, we could recognize it as downtrend.

Besides, we able to spot a strong upward move on its recent movement which indicates a strong momentum.

2. Rally in price comes along with the uprising in trading volume

Price and trading volume should be moving together. When the share price is moving higher, or had a spike up, the volume should be moving significantly higher. This represents that the buying comes with strong trading interests.

TOPGLOV 30-min chart shows that the trading volume was significantly higher when the share price was making a strong rebound from the selling. Volume was stronger compared to previous volume when the price was dropping.

3. Mild profit taking on post rally

In order to rally higher, the share price will need to make a healthy retracement/pull back. A pull back in share price after the rally, indicates profit taking activities by short term traders & scalpers. Thus when the share price breaks higher in future, it encounters lesser resistance as the profit taking already taken place. On the other hand, short term traders might come back and buy to trade on the technical breakout.

However, the pull back/retracement is preferably to be a mild one and not more than around 60% of the prior rally. A deep pull back would shake the confidence of traders & investors, which might trigger them to sell when the price retest the resistance high.

TOPGLOV 30-min chart above illustrates a good example of mild profit taking after the rally.

4. Retracement comes with a lower volume

As mentioned above, price and trading volume should be moving altogether. When the share price is making pull back, the trading volume should be diminishing. Trading volume needs to be significant lower in comparison to the volume during rally, whereby only short term traders exited while others still confident that the price will go higher.

From the chart above, we can see that the volume has significant decreased after the rally and picked up during later part of the retracement. This indicates that traders start to accumulate after the short term traders have taken profit.

Applying on TOPGLOV

TOPGLOV 30-min chart has displayed a potential upward continuation as it fulfills below conditions:

1. TOPGLOV had a strong rally
2. The rally came with a significantly strong volume
3. Price is making a mild retracement, in a rectangle with resistance at RM8.07-RM8.09
4. Retracement is trading at a lower volume in comparison to the previous volume during the spike up

Given that all these credentials are spotted, the probability of winning is high if buy on the breakout at RM8.10. However, if the share price fails to go higher, we can use the rectangle low at RM7.87 as our immediate stop loss. Meanwhile the resistance level to be watched out is at RM8.28 and RM8.50.

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