Why Bumi Armada drops 17% in a single day

Since the beginning of the year 2019, Bumi Armada has bottomed and slowly gained strength along with the consolidation phase. In the price action between January to August period, we able to identify a few high volume trading days. This high volume indicates large operators trading activities. Retailers like us can never achieve that kind of trading volume. That’s the reason why chartists study price action together with volume.

On my previous May 2019 Bumi Armada post, I mentioned the stock was under accumulation phase and the support was RM0.215 (Click here). Unfortunately, the stock did no hold above the support and cut lost was made below this support. After breaking the support, the stock traded above RM0.18 and gained moderately with low volume. This point out lack of supply below this price.

The stock continued to consolidate in August 2019 with low volume. The sudden momentum before the day of Malaysia National Day broke the resistance and edged higher for 13.92%. Here, the stock skyrocketed 88.03% in 47 trading days from RM0.21 support on surprise earnings. This shows the possibility of buying from large operators.

The red candle on 22nd October with high volume presents a question mark to chartist whether it is a shakeout or distribution. The -17% drop erased 3 days gain and it could be a distribution action. Personally, I think this is a shakeout. However, I won’t trade this stock because this red candle holds an ambiguous meaning and I will wait for the next price action to confirm the re-entry position. (Click here for the full picture)

Author: Gerald Koh