Bright World still bright?

BRIGHT WORLD PRECISION MACHINERY LIMITED, incorporated in Singapore in 2004, has seen its fortunes rising and falling over the years. On 11 Nov 09, I posted in a forum about the spectacular results the company reported. Its CEO bought 900 lots in the open market at a price of 16c per share too.

I said: Revenue for 3Q09 improved 73.2% compared to 1Q09 and improved 33.2% compared to 2Q09. Nett profit for 3Q09 improved 282.4% compared to 1Q09 and 235.7% compared to 2Q09. This company is rising once more as its fortunes are closely tied to the recovering manufacturing sector in China.

Unfortunately, it was called up by the CAD and the price crashed a week later on 18 Nov 09: Price touched a low of 13c today. Is currently at 14.5c. Everyone is afraid. What is CAD investigating Bright World for? It is probable that Bright World has been called up regarding an investigation which MAS was conducting over possible breach of disclosure rules. If this is the case, it should not have any material impact on the company's business as a going concern.

On 23 Nov 09, I said: Potential catalyst would come from a benign update from Bright World on details of the call up by CAD. Improving numbers from Bright World's business were reported in the quarterly report prior to the call up. So, the next report, which I expect to be even better, is still a few months away and unable to influence price action in the near term.

I still believe that Bright World's business will continue to improve with the Chinese PMI rising unabated. Its financial numbers are also good. However, transparency is lacking with regards to CAD's investigation. Bright World's weekly chart shows a confluence of 20wMA and 50wMA providing resistance at 17c. On the daily chart, the 50dMA and the 100dMA provide resistance at the same level. The flat 200dMA provides support at 15.5c. So, it doesn't look like Bright World's price will collapse but it's not going to shoot through the roof either.

Strategy: I made a decision to cut my exposure by 65% and move the funds into other more transparent investments. The remaining position in Bright World represents the maximum I am comfortable enough to commit to a clouded waiting game. In the event that the CAD investigation turns out to be a non-issue, coupled with stronger corporate results, overcoming the 17c resistance would see an eventual target price provided by the declining 100wMA, currently at 27.5c.

Charts for Golden Agriculture

In a post on 24 Dec titled "Chart Reading: Golden Agriculture", I said that there is strong support at 46c provided by the rising 50dMA and 100dMA but I would do a partial divestment if price hits 50c in the short term. This is largely because there is a lack of buying momentum in the short term and the price might pull back to support upon hitting 50c. I would buy more at closer to 46c in such an instance. The lack of buying momentum is quite clear on the daily chart with the MFI forming lower highs and the MACD flat.

















Over the longer term, I continue to believe that Golden Agriculture is going up. Looking at the weekly chart, it becomes quite clear why 50c is a major resistance. That resistance is provided by the declining 100wMA, currently at 51c. Rising 20wMA is at 46.5c. Overcoming the 100wMA will take some time but it will happen as the rising 20wMA seems on course to form a golden cross with the 100wMA in the next few weeks. This gels with certain views that demand for crude palm oil will strengthen towards the Chinese New Year celebrations.

Strategy: Take some profit off the table if price hits 50c. This is a hedge in case price weakens to support. Buy again at support or close to it if this happens. Overcoming the 100wMA in time will give a target price of 62c. Why Golden Agriculture?