Yongnam: Immediate support at 25c.

Yongnam's share price has been rather stable. As a counter's share price sees a reduction in volatility, Bollinger Bands would start to narrow and "squeeze".  The beginning of such a squeeze is being observed here.

Daily chart.

A trading strategy using Bollinger Bands is to look out for an oncoming squeeze. This could be the precursor of an impending surge in price.

Couple this observation with how the rising 50dMA seems capable of acting as support in this case, there is a chance of Yongnam's share price going higher in time. The 50dMA also coincides with a trendline support which connects the lows of mid December 2011, February 2012 and March 2012.

Volume has dwindled while the OBV has flatlined. Not much activity either way. Who would blink first? The bulls or the bears?

Yongnam's fundamentals are strong and technically, there is support for its share price at 25c.

The counter should also be trading CD come end of the month. The proposed dividend is 1c per share.

However, if support at 25c should break, Yongnam's share price could fall to 24c, a longer term support.

Weekly chart.

Related post:
Yongnam: FY 2011 results.

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Capitaland: Technical analysis can be simple.

Some readers asked me if I could teach them technical analysis. I have always declined, saying that it is easy enough to pick up. There are many good books out there and many good websites where one could pick up technical analysis.

Technical analysis can be quite simple. For example, this weekly chart for Capitaland shows the MACD rising in a wavelike pattern into positive territory. This means that longer term momentum has turned positive. It is also quite clear that price action broke out of a base formation and has seen a reversal in trend.

Now, does technical analysis tell us if the price would continue to rise or fall? I would be hesitant to say "yes". Technical analysis shows us resistance and supports. It shows us the probability of something happening but never certainty.

In this instance, technical analysis tells us that there is probably resistance at $3.25 in the event that the share price continues to rise. It also tells us that immediate support is probably at $2.75 in case of a pull back. $2.75 is the top of a double bottom formation and it is also where the 50w MA has flatlined. It is also where the rising 20w MA could form a golden cross with the 50w MA in the coming weeks.

Anyone who is thinking of going long would probably be happy doing so in case of a pull back to $2.75 thereabouts while anyone thinking of selling could do so at $3.25. Simple enough? Just don't think of technical analysis as the Holy Grail.