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There are a few stocks which I would like to accumulate on weakness in the near term. China Minzhong is one such stock.
Many like Jim Rogers have put forth a convincing case of an impending food crisis. In the event of global food shortages, it is logical to expect food prices to rise. So, investing in food producers seems to make good sense.
Improving numbers, insider buying, an experienced management and the right industry, I believe China Minzhong is a good company to invest in. Also, there could be more positive catalysts and these could push its share price higher.
After hitting a low of 53c in early June, its share price rose to hit a high of 87.5c on 19 Oct. That is a meteoric 65% increase in a short span of 4 months.
The daily chart is showing some fatigue. Some consolidation is to be expected. The immediate support is at 78c. If that should go, next supports are at 74c and 70c. The MACD which is a pure price oscillator suggests that supports could continue to be tested. However, the Chaikin Money Flow does not show any significant outflow of funds which suggests that long holders are not in any hurry to sell. We could see share price doing what Daryl Guppy calls a correction using time which means people waiting on the side hoping to get back in when there is a price correction could be disappointed.
The weekly chart shows quite clearly that the downtrend has reversed. Breaking immediate support could see share price declining to test the 20w MA in the longer term. This currently approximates 71c. As the 20w MA is rising, the longer term support would be a higher value over time. The declining 100w MA, currently at $1.10, could cap any further price increase in the near future.
Buying when there is a test of supports with longer term MAs rising seems like a good idea. However, remember, TA shows where the supports and resistance are but it does not mean that they will be tested.
Related post:
China Minzhong: Opportunity in slowing momentum.
“If food inflation in China remains high, there is a high chance that the management’s revenue target (of 15% growth) could be surpassed.” Maybank-KE keeps a Buy call with $1.16 target. Read full article in The EDGE.
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