Eco World International showed upthrust on 69% profit announcement

Eco World International showed upthrust candle with high volume on the IPO day, 3rd April 2017. Normally, I avoid this type of chart pattern because it means the sellers have overcome the buyers and imminent climatic sell is on the way. Moreover, the limited information from one-day trading is insufficient to determine the next price action. On the following trading days, the stock dropped -21.86% and a bounce occurred on 13th June 2017. This was an automatic rally, however, it was not worth a gamble to trade this stock because the candles were travelling below 65-day moving average.

On 29th November 2017, the chart pattern looks like a sign of strength after the accumulation phase for 5 months. The red candle on 30th November 2017 cancelled the upside possibility. Here, the stock continued to drop -5.87% and supported at RM0.97. During the bull market, the stock enjoyed the ride and rallied to RM1.13 for +16.47% gain. It was a good rally because the stock was traded at a higher price and it also implied a sign of strength. However, the stock began to show weakness again on 26th January 2018 and plummeted -18.15% to RM0.90 in June 2018.

Again, the stock rallied with the bull market in July 2018 and the rally did not persist. Here, the stock continued to drop until RM0.60 in August 2019. The lower low price action indicated the stock was weak and the previous fake sign of strength prompted me to avoid this stock. Although the rally since October 2019 might looks promising, I reckon traders should avoid this stock. Furthermore, the upthrust candle with high volume on 12th December 2019 specified a distribution action. Trade safely. (Click here for the full picture)

Author: Gerald Koh