OpenSys Bhd (opensys) technical analysis January 2020

I came across opensys as I was looking through my ‘Income watchlist’ for potential entries. I wondered how a tech company ended up in the list because these guys are not usually famous for giving good dividends. A closer look though showed that, while its current yield is only about 2.7% – I took the historical average of 1 sen and current price of around RM 0.37 – it has however paid this dividend consistently at least for the past 10 years. Since the past 2 years it has increased this dividend quite significantly. 

Yes two years of increases is not going to make it a dividend aristocrat but when there are only a handful of stocks (on the KLSE) that pay growing – or at least consistent – dividends, then I’d keep a tab on every one of them. 

All these factors combined and I’d be willing to consider it as part of my portfolio. 

Chart pattern 

Cup and Handle (CnH) in an uptrend is usually a bullish signal

The most obvious thing I saw on Opensys chart was a Cup and Handle (CnH) on a long term uptrend. 

Trend 

MA50 is above MA200, both inclined upwards indicating an uptrend. DMI is lacking in adrenaline.

Opensys can be considered to be in an uptrend for the moment. It has been forming higher highs and higher lows. Also, its 50 period moving average (MA50) is above the 200 period moving average (MA200), both MAs are pointing upwards and the price action is hovering around the MA50. 

DMI

I have the impression that not so many use the DMI in their decision making but I have a habit of referring to it for my analyses as a measure of trend strength and to predict coming trend strength or trend weakness. 

The ADX is trending lower after a nice run up and the +DI and -DI are converging, indicating a weak trend. Considering the bullish MAs which may also be used as indicators of trend strength, it is possible that the trend weakness indicated by the ADX is showing a short term retracement. 

Of course, it could very well be a reversal and we’ll only be able to tell after the fact. This is a risk that every trader/investor has to consider when making a decision. 

Trading plan

CnH pattern trading

Opensys may be a candidate for pattern trading and/or trend riding. If you are inclined, it may also be considered for long term income investing which is my main aim. 

RM0.36 is a short term support and possible bottom of the ‘Handle’. Resistance is around RM0.41, the tip of the ‘Cup’

A pattern trader may consider entry around RM0.36, a potential handle bottom. Should prices fail to maintain this level, a strict pattern trader may consider cutting their losses. How you decide failure depends on your preference or current knowledge. Some chose a close below the support, some a full candle closing below support. My belief is that a strict trader who does not want to or cannot afford to hold out a position should have a cut loss (CL) strategy, and should execute it if triggered. If you are in it for the long term as a value investor or income investor who doesn’t care about the price fluctuations, then maybe a technical cut loss is not significant. 

If the CnH pattern is successful which would be indicated by a breakout above the right tip of the cup around RM0.41 area – and possibly a retest of this new support – price may attempt to reach the RM 0.55 area which pattern traders or swing traders may set as a target price (TP). 

Trend riders may also consider entry around the current price of RM0.37 which is around the MA50 and continue to hold as long as the MA50 is above the MA200. More conservative trend riders may CL if prices move below the MA50. 

Personally, I am more of an income investor. I invest long term for dividends, but chose my entries based on long term technical analysis – mainly based on pattern and trend analyses. I will sell my positions if there are better opportunities. 

I will enter at the current price and may take partial profit around the RM0.55 area and add more positions when prices retrace to the moving averages or around structural support. 

Business potential

Leave a Reply

Back to Top