China Hongxing: Another S-chip bites the dust.

Flipping through the latest issue of The EDGE, I found a full page write up on China Hongxing.  It is rather negative with a title like "China Hongxing unveils plan for cash pile, but analysts fear it is coming too late".

"China Hongxing's fast growing cash pile has been a source of consternation for investors for more than a year.  Some were irked by the company's apparent refusal to invest the money or return it to investors... Some were even concerned whether it actually had the cash reflected in its accounts."

Analysts are downgrading the prospects of the company en masse despite the company reporting a net cash position of 22c per share.  The share price closed at 14c on 5 March.  CIMB-GK and Kim Eng Securities even ceased coverage of the company altogether.

I decided to take a look at China Hongxing's charts.  Looking at the MACD, it is in negative territory, pulling away downwards from the signal line. The MFI has dipped into the oversold region and formed a lower high, signalling negative buying momentum. 

I have drawn the downtrend channel for China Hongxing in light green. 14c is currently at the channel support.  However, if this breaks, the next support is at 12c and a stronger one is at 10c.  Any upmove from 14c is likely to be just a rebound from oversold conditions and would meet with resistance at 16c, thereabouts, which is provided by the descending 20dMA.  If, in the unlikely event that the 20dMA is taken out, very strong resistance is provided by a confluence of the 50d, 100d and 200d MAs, which are at 19c, thereabouts.

Healthway Medical falters while Golden Agriculture shines?

Despite a return of positive momentum, Healthway Medical was unable to overcome the initial resistance of 17c which was identified in my post two days ago.  Instead it closed at 16.5c today, forming a gravestone doji in the process.  This is ominous.  Also of note is that the repeated attempts to overcome resistance is not accompanied by any meaningful increase in volume. The upmove might just falter unless we have an expansion of volume with the next push up.  Finally, the MFI is fast approaching the overbought region and bears watching.

Golden Agriculture's price action formed a white hammer today and closed at 54.5c.  This suggests that a trend reversal is at hand.  This is coupled by a buy signal on the MACD.  MFI has hit 50% which has acted as support on two other occassions in the recent past.  An upmove in price would meet with initial resistance at 57c, followed by 59c. 

Fundamentally, the price of crude oil has been on the rise (currently US$81.93 per barrel) and crude palm oil has risen in tandem, closing at RM2,670 today.  This bodes well for Golden Agriculture.