Revenue breaks resistance as market positive outlook continue

Revenue Group Bhd reported increased revenue and profit on 21st November 2019 quarter report, increased 54% compared to the previous corresponding quarter. The group also reported positive prospect as they are eyeing more partnership with financial institutions for the electronic payment. Additionally, RHB retail research reported upside move may persist and immediate resistance of RM1.50 is followed by the RM1.60 level. After this news is released, the market starts to rush in to buy this stock and push the price up.

The P/E ratio is tremendously high if traders are using the benchmark of 25 (mentioned in some books). It shows P/E ratio is not the most important factor in stock selection. I do use P/E as a guideline, however, there are more important factors that function as the catalyst of the stock upside movement. For example, growing profit which Mr. Koon Yew Yin has been emphasising. I do find it useful for my trades.

Let’s discuss the technical analysis.

After the IPO in July 2018, the stock rallied 105% in one month time. Then, the rally paused and the stock consolidated until October 2018. During the consolidation, an indication of demands had tired occurred on 29th October 2018. The longer down candle compared to previous down day implied a possibility of further downside movement. However, the stock bounced quickly and rallied 67% in November 2018. It was a good rally and it indicated the stock could be going into the accumulation phase.  

Here, the accumulation phase persisted for more than half year period until June 2019. It was a quiet accumulation phase with strong support above RM0.70, although the major market indices were bullish. On the other hand, you can actually draw a descending triangle formation if you like to draw chart patterns. This descending triangle did not indicate a bearish pattern as what many traders perceived. To me, that’s the best accumulation phase!

In July 2019, the price action was the most interesting part of this stock; the stock rallied and showed a sign of strength. The sign of strength broke the resistance line which confirmed the bullish bias price action. Although possible upthrust on 11th and 15th July 2019, the stock continued to hold above RM0.85 supports. The spring action on 15th August 2019 specified the buyers were solid and picked up the stocks available in the market.

In October 2019, the stock rallied 16% and RM1.00 served as the support line before the quarterly report on 21st November 2019. It was a challenging period for the traders because it could a distribution phase due to an upthrust candle with high volume occurred on 23rd October 2019. Traders would have to put extra effort if they wish to trade during the quarter reporting month. The possibility of distribution action continued with another upthrust candle arose on 22nd November 2019, the next day of quarter report.

When the stock broke RM1.10 resistance on 3rd December 2019, the whole distribution phase was reversed and bullish action could be imminent. Here, the stock rallied 37% and it was a good trade. I reckon further upside is possible if RM1.50 resistance line is broken. However, it is not advisable to buy a stock when it is hot except you are good in technical analysis. Trade safely.

Author: Gerald Koh