Trading Stocks: SCGM (7247)

Hi Readers,

I was looking into my screening results for trading stocks and SCGM (7247) triggered my screening rules for trading stocks. Trading stocks for me are stocks with positive momentum and the intention is to ride its bullish trend for short term. It can be as long as the trend persists.

SCGM Bhd (7247) is an investment holding company. The company along with its subsidiaries is a thermo-vacuum form plastic packaging manufacturer. Its business segments are Manufacturing and Investment holding. It derives most of its revenues from Manufacturing segment. The group is principally operating in Malaysia.

Image 1 below showing the trend the development for SCGM. Looking at the chart below, the share price finally broke out from its year long falling wedge pattern beginning of Sep'19. The trend continues to build upon its recent QR which was announced on 24th Sep. As it is a trading stock that came up from my screening rules, I will not drill into its QR or the fundamentals of it for now; until the company completely switch to biodegradable materials. Will be analyzing its technical strictly.

Image 1: SCGM Price Actions and Trends development

 Chronology of technical patterns/candlesticks development:

1. 11th of Sep:
• Price breakaway from its year long falling wedge pattern with high volume. A positive sign that traders are taking a bet that its upcoming QR will be good.
2. 24th Sep:
• Price further moved up strongly with even higher volume and crosses above the 200 days daily MA. A growing bet that the QR at the end of the day will be good. And, indeed the QR results is pretty good (+130% qoq, +107% yoy).
3. 27th Sep:
• A long legged doji appeared at the top which coincides with its resistance at $1.20. Price action for the day was Open: $1.18, High:$1.25, Low: $1.16, Close: $1.18. A long legged doji often signifies indecision after a strong uptrend or downtrend. In this case, it appeared after a strong uptrend and at its resistance. The forces of supply and demand are nearing equilibrium and that a trend reversal may occur. The trend reversal may just be a blip, indecision of future directions including possible entering a consolidation mode.
4. 30th Sep:
• The share prices closes at $1.16 (-1.7%). While it is still uncertain at this point, I will be watching how the price actions evolves over the next few days or weeks. A typical consolidation can be as short as 3 to 5 days and as long as 3 weeks. Anything beyond 3 weeks signifies further weakness on its price actions. Time to get out from the trade.

Based on the chronology above and the latest candlesticks which is a long legged doji, there are two setups that I will wait for it to develop before initiating a position. I am also aware that SCGM has 193M shares only which means selling it can be a challenge.

1. Bullish trend resumes:
• Entry: Price rises and closes above $1.25 (above the long legged doji)
• Stop Loss: Price closes below $1.16 (below the long legged doji)
• Exit: According to your own rate of returns or the levels in Image 1
• Remarks: As it is a trading stock, one can use the risk/reward ratio to determine the appropriate trading plan and lot size. Time and volume matters when it comes to chart patterns development. 
2. Entering consolidation phase:
• Entry: Price falls to the range of $1.065 - $0.945 or reversal to close above $0.945
• Stop loss: Price closes below $0.945
• Exit: According to your own rate of returns or the levels in Image 1
• Remarks: If it is entering consolidation phase, one can wait for the completion of wave 2 before entering. There is no rush to initiate a position as wave 3 is always the longest wave from Elliot Wave perspective; provided the behavior of buyer and seller exhibit Elliot Wave Theory. Time and volume matters when it comes to chart patterns development.

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 as this article is not a recommendation to buy/sell.