Stock to Watch: UCREST (0005)

Good day to everyone,

The week started with a surprise from Donald Trump on the tariffs threat on Chinese products. The message spooked the global market worldwide with DJIA down by 500 points before recouping some of the losses when the market opened and China market was down by 4%. KLSE was not sparred and it was an opportunity to start looking again. Hence, I was looking at my charts / watchlist and UCREST (0005) caught my attention again 😄 My friends would have recalled back in May'18 whereby I have asked them to buy Ucrest during Ivan's wedding dinner. We were riding the uptrend all the way until 0.40 cents and sold out everything by then. 

UCrest Bhd is a technology provider company which engages in network design, product development, and software development. The firm provides a solution for broadband, wireless and networking products, and services. The company provides technical services to customers such as Telco, ISP, broadband operators, hotel operators, property developers, enterprises and wireless hotspot operators. The groups are engaged in projects related to networks, security systems, and the Internet of Things (IoT) Cloud software application areas. Majority of the revenue comes from the sale of the Internet of Things (IoT) Cloud hardware platform. The company makes its major revenue from Sales of Goods segment and has operations in Russia, Malaysia, and Singapore.

Why would I look at my charts whenever market is spooked? The inspiration came from none other than Warren Buffett:

Quote from Warren Buffett

Its easy to just say the quotes but how do you apply that? For me, it boils down to the homework that has been done upfront and waiting for the opportunity. Below are the steps that I am using:

1. Pre-work:
• Create a watchlist of stocks that you are following. A list of 20 to 50 stocks is good and if you can do more, its even better.
• Update each individual stocks valuations and its charts (support, resistance, key SMAs)
• You can choose to use some apps with stock alerts like KLSE Screener or Chart Nexus (paid subscriptions) that will trigger you when your watchlists triggered the price actions that you have been waiting for.
2. Monitoring:
• When it triggers, check its fundamentals (latest quarter report or annual report or any red flags) and its technicals. If there are no red flags, then, you make a move with your predetermined trading plan (entry/exit). 
• Once done, you wait again and follow your trading plan. 

Back to Ucrest, my last entry in May'18 was at $0.205 and since exiting at $0.40, I have been waiting for it to come down again. Yesterday market panic brought Ucrest down to $0.22 cents and triggered the alert that I have set since last year.

Image 1: Daily Ucrest Chart

Image 2: Weekly Ucrest Chart

Image 1 showing technical support at $0.22 while mid term support at $0.20. It is currently at oversold region as shown in Image 1. As for Image 2, the 200 days MA for the weekly chart is at $0.175. Technically, Ucrest is approaching a level that is very attractive for trading.

I did a check on its financials to ensure that there are no red flags and below is the summary extracted for Ucrest:

Image 3: Ucrest last 2 years financial performance

Looking at the financials, a quick glance would have been red qoq and yoy performance. 😃 It is true indeed. However, have a look at its net profit margin (NP Margin) and its higher compared to the previous year despite lesser quarterly revenue. If you were to look at its 2018 Annual Report, you will notice that Ucrest spent most of its earnings on intangible assets as shown in Image 4. There is strong evidence that Ucrest is moving towards higher net margin and profitability in future. Intangible assets are typically intellectual property - patents, copyrights, proprietary softwares. In the case of Ucrest, it is the proprietary softwares. 

Image 4: Extracted from Ucrest 2018 Annual Report

Looking at the technicality and the fundamentals of Ucrest, my personal opinion is that this should be in your watchlist as well. 

Possible trade setups:

Entry: $0.22 +/- 3%

Stop loss: $0.17 and below

Target profit: According to your rate of returns or the levels above

Remarks: One can split the entry into multiple transactions as part of risk management on your capitals. Watch for the support level. A reversal at the support level indicates a move towards upside. 

Good luck and all the best!!!

Disclosure: The information above is for sharing purposes without any understanding of investment targets and needs of readers. References to the price movements is informational based on my analysis and data obtained from sources believed to be reliable at the point of writing. Please do your own due diligence before initiating a position as this article is not a recommendation to buy/sell.