Serbadinamik Holdings Bhd (KLSE: Serbadk, 5279) Technical Analysis April 2020

Potential Support and Resistance Areas

Serbadk weekly chart

Horizontal Green Lines: Potential support areas

Horizontal Red Lines: Potential resistance areas

A simple look at the weekly chart of Serbadk shows that these levels may be of significance to investors and traders. How you use them will depend on your investing and/or trading plan.



Related post…

If you are trading or investing in oil-related stocks, potential price movement of oil is likely important. Read our technical view on Brent price here:



As a long term investor (>5 years, likely even more depending on business nature) for example I look to buy dips as prices approach potential support areas. In the current case of Serbadk, this would be around RM1.485.

One common way of using a support is to wait for sell volume to dry up and a reversal candle to form and be confirmed before entering a position.

Pattern analysis

After forming a double top (purple rectangle), breaching its support (red arrows), Serbadk went on to form an ascending triangle (orange triangle). Triangle patterns are typically continuation patterns however sometimes – as in this case – it served as a reversal pattern.

*Ascending triangles when they form inside an uptrend are pretty strong bullish continuation patterns. They are one of my personal favorite trading patterns!

Price broke out from the triangle consolidation on 2nd April 2020 but was strongly rejected the next day when it reached the potential target price (TP) of the triangle (green arrows).

Although the triangle breakup may signal a reversal, we should not forget that Serbadk is still in bear territory having fallen more than 50% from its high of around RM2.5 to a low of around RM1. As such I am considering any bullish move with caution.

Serbadk is an oil industry-related company. As I have illustrated in a previous post: Brent Oil Futures Technical Analysis, oil is still technically in a downtrend and while short upward moves may occur, the longer term trend is still – technically – down. So until a trend reversal is confirmed by the formation of higher-highs and higher-lows, then being a little extra cautious is likely more prudent.

Conclusion

As of April 2020, RM1.485 area is the nearest structural support. Those with a bullish bias may consider initiating a position as prices approach this level. Waiting for a reversal signal and a confirmation signal may be one method to consider.

As Serbadk is technically in bear territory, oil prices being bearish in the long term and macroeconomics being unfavorable especially with the course that the COVID-19 Pandemic is going at the moment (unless something happens to change all of this), my stance is to be wary of getting too excited in the market.

My approach as a long term investor is to chip in small positions when markets are red or is taking a rest at technically logical prices. Before that of course, I will choose only the most fundamentally strong companies with a good track record, sustainable and consistent dividends (I’m mainly an income investor), and diversified across industries.

Bear markets, market crashes and catastrophes (which cause the former two) are opportunities to buy great businesses at great prices. It is a time where wealth is made for the prudent and patient investor.

At the same time, it is also the best opportunity to show the best of ourselves, to give and (because of it) be rewarded with something much better than wealth alone.

Darius Tanz


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