Kronologi Asia Bhd (KRONO) technical analysis December 2019

Kronologi Asia Bhd (KRONO) caught my eyes as I was skimming through the top volume counters on bursamalaysia.com on week 4 of December 2019 (23-27 December).

Possible cup formation?

This is the chart of KRONO that I saw on the KLSE screener app and the patterns that came to my mind.

Pattern

The trend is our friend. I am a strong believer and follower of this maxim which is why I normally like to comment on the trend first – and also use it as a trading/investing guide.

However I also believe in the rule that obvious things are obvious and are more likely to be seen which I learned from Rayner Teo’s channel. I don’t know if it is a common wisdom – maybe not so much since a lot of traders like to use complex analyses which few outside of the most experienced and technically minded traders can replicate – but I feel that there is logic to it.

And the most obvious thing I see on this chart of KRONO is the cup and handle (CnH)

The first CnH formed between 2015-2017, with a bottom of around RM0.2 and a lip of around RM0.4. It then broke out from the handle and reached the target price (TP) of the CnH of around RM0.6 in 2017.

After a short breather, the price raced up 100% from the CnH TP to reach a peak of around RM1.2 in less than a year.

After the peak, KRONO has fallen to around RM0.5 level which seems like a good support level for now. From there it has tried to go up several times and formed a possible resistance at around RM0.8.

Small CnH: base RM0.5, peak RM0.8, TP RM1.1… Possible bigger cup? Base RM0.5, peak RM1.1

Trend

After peaking around RM1.2 at the end of 2018, and going down to around RM0.5 since then, KRONO seems to be making a second cup. This one with a bottom of about RM0.5 and a potential peak of around RM1.1.

Within this potential bigger cup, KRONO has formed a smaller cup from RM0.5 to RM1.1 and may currently be forming the handle of this cup.

The bottom of both cups are higher than the bottom of the previous CnH of around RM0.2. The formation of a higher CnH may be seen as a bullish signal in addition to the bullish signal that a CnH itself represents.

The moving averages show a likely uptrend with the 50 period moving average (MA50) moving above the 200 period moving average (MA200) and both MAs are pointing upwards.

Should KRONO break out to above RM0.8, prices could potentially go towards RM1.1.

Shorter term picture

Lower highs, a double top (the second one in fact) and potentially forming a bigger double top

The shorter term picture however, shows a rather bearish picture with the formation of a lower high, two double tops and the potential for a bigger double top.

Should this bearish picture pan out, the CnH on the bigger picture may be negated. What will happen next? – we may have to wait for the picture to reveal itself.

But I am not a fortune teller or a lamenter. I am a technical analyst who bases his analysis on existing facts and I try not to regret (too much) making a mistake based on whatever facts I had in the past when new facts emerge in the future. After all, no one can really know the future.

Should Warren Buffet regret not getting into Microsoft or Amazon early on? Should a medical student (who is mainly motivated by the prospect of a stable job and pay) regret taking medicine only to find out that it will not be able to provide this to them?

A bit maybe. I always do. Humans will be humans after all. A lot… There’s not much point in that is there? No one can change the past. We can only move forward and shape the future.

Conclusion

KRONOs current price of around RM0.7 is quite close to the RM0.8 resistance, compared to the potential downside risk of around RM0.5, though it may take RM0.67 thereof as a support.

The traditional wisdom of trading a CnH is to wait for a breakout above the cup. A more conservative person may even wait for a retest of support after the breakout.

No buy signal… Yet

The technical indicators do not show any BUY signals at the moment. The ADX does not show a strong trend. The MACD and stochastic indicators also do not support a buy action.

So while the longer term picture seems rather nice, it may be prudent to wait a while more for a better price.

Of course, investors who see value from other perspectives and long term traders, position traders or trend riders who wish to ride the golden cross may build their positions as they see fit.

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