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Saturday, February 28, 2015

Cashing in on Pestech too

On Thursday, Pestech has finally risen above RM5.00 for the first time after the share split in 2014. During the CFA class, I have learnt about some technical indicators and so I have tried to use them on Pestech:

First technical indicator I used is the Moving Average Converge Divergence (MACD). According to Investopedia, MACD is a trend-following momentum indicator that shows the relationship between two exponential moving averages (EMA) of prices. EMA is simply the weighted average closing price of the last few trading days that gives more weight/emphasis to the latest data. MACD is calculated by subtracting the 26-day EMA from the 12-day EMA. Then we use a 9-day EMA of the MACD, called the "signal line" as a trigger for buy and sell signals. In the area highlighted by blue circle chart below, the MACD line crosses and rises above the signal line, meaning it is a bullish sign. On 28th February 2015 (red circle), the MACD is still above the signal line and thus Pestech still in bullish mode.

Second indicator I used is the Relative Strength Indicator (RSI). According to Investopedia, RSI is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. RSI ranges from 0 to 100. Once RSI hits 70, it is considered overbought and the asset is likely to experience some pullback. In the case of Pestech, it was in overbought mode in the last two trading days (26th and 27th February) as highlighted by the red circle below. However, if the RSI drops below 30, then it is technically oversold and will likely to rise.

The two technical indicators indicate that Pestech is still in bullish mode and thus likely to have some more upside. However, the cautious me decided to exit while the market is still bullish and the Pestech volume is still high. So I sold my 1000 units of Pestech @ RM4.96, earning 22% Holding Period Return (HPR). The two transactions in 2015 so far:  

After this transaction, Huat Fund looks like this:

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