In the past 2 years, Annjoo enjoyed a price run-up of more than 6 folds,
from 60 sen to almost RM4.00. This makes Annjoo the best performing
steel producer in our market.
Annjoo's share price has pulled back to its uptrend line in the current
correction. If you stick to the rule that a trend remains intact until
it has reverse, then this would be a buying opportunity. While
indicators - like ADX & MACD - are cautioning against possible break
of the uptrend line, until that has happened the trend remains intact.
Chart 1: ANNJOO's weekly chart as at Jan 16, 2018 (Source: Malaysiastock.biz)
Why did Annjoo drop so much in the past 2 weeks? The drop in Annjoo's share price could be due to the correction in steel rebar prices in China in the past 2 months. Rebar prices peaked at 4950 yuan in December last year, and is now trading at 3800 yuan- a drop of 25%!
Chart 2: China Steel Rebar Price chart as at Jan 16, 2018 (Source:Sunsirs.com)
Is this a short-term correction or has steel rebar prices peaked? Looking at the chart below, we can see that the last 2 years rally is fairly similarly to the 200-2008 rally which ended during the Global Financial Crisis. While there is no crisis on the horizon, a reversal in the price uptrend could lead to lower steel prices and lower earning for steel companies.
Chart 3: Global Steel Rebar Price chart as at Jan8, 2018 (Source: Steelbenchmarker.com)
Based on the above, we must be careful to avoid over-exposing ourselves to a sector that's in peak earning today. As for Annjoo, you would have to monitor closely and be prepared to take the necessary action to reduce your position in the event the share price breached the uptrend line at RM3.60.
http://nexttrade.blogspot.my/2018/01/annjoo-at-uptrend-line.html
