PESONA (8311) - Pesona & Pesona-WA: What's up? (UPDATED)

PESONA (8311) - Pesona & Pesona-WA: What's up? (UPDATED)

One of the basic tenets of Dow Theory states that the market averages or indices must confirm each other. That tenet or principle came about when Charles H. Dow wrote about the divergence between the Industrial Average & the Transport Average. In America, where its industrial output must be shipped from the production centers to the population centers for consumption (or to the ports for export), improved business outlook for industrial sector will lead to similar improvement in the transport sector. Thus, the economy is doing well if both the Industrial Average & the Transport Average are moving higher. Obviously, if both averages are moving lower, the economy would be slowing down.

What if the Industrial Average is moving higher while the Transport Average is moving lower? This simply means that there is divergence and that the rise in the Industrial Average does not presage improvement in the economy. In fact, when we see divergence in indices or securities that should move in congruent, we should be very concerned.

This morning, we saw Pesona gaining 7 sen to RM0.88 on a volume of 41.6 million. Strangely, Pesona-WC - a fairly new warrant with an exercise price of RM0.25 -  only rose by 0.5 sen to RM0.505 on a volume of 29.3 million. Thus, Pesona-WC - with 1746 days to expiry - is now trading at a discount of 14%.  Why?

If we apply the aforementioned tenet -and I don't see why we can't - we should be concerned. 

UPDATE: This is not a call to try your luck with the warrant, though I think the warrant may make a quick run for it. Whenever you see something like this, the best thing to do is to AVOID getting into the stock and/or warrant. If you have the stock, you should try to SELL INTO STRENGTH.

 
  Chart 1: Pesona daily chart as at Apr 17, 2015_12.30pm (Source: ShareInvestor.com)

 
 Chart 2: Pesona-WC daily chart as at Apr 17, 2015_12.30pm (Source: ShareInvestor.com)

Note:

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Pesona & Pesona-WC.

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