JCI: a Record High

the Jakarta Composite Index (JCI) has been rallying since mid February 2010 to reach a new record high in its history at around 2900. The foreign investors are the major buyer with total fresh fund inflow more than 3 trillion rupiah for the 1Q 2010.

In the last few days, the market has some correction. I believe this is just a normal correction, while the overall trend is still bullish.


(Source Dongsuh Securities, edited)

If the JCI could maintain its first uptrend support, the JCI would continue the rally again in the next few days. But I prefer to choose the second possibility. The JCI might not be able to maintain its first uptrend support, hence it would retrace to around 2730 (38.2% fibonacci retracement). Hence, if this is the case, I suggest to take some profit and wait until JCI reach 2730 that might be happen in about a 2-3 weeks, and then get along with the bull again.

JCI: Wacth out of a correction

In the last few days, the JCI has gained significantly. Since the breakthrough of the ascending triangle pattern it has gained about 4%. The yield to date per today close is 5.61%.

If you look at the chart, you could see that JCI has a very good volume that confirmed the bullishness. I also notice that some foreign brokers are still accumulating Indonesian blue chip stocks.

(Source: Dongsuh Securities, edited. Click to enlarge)

While in the medium and long term I am still positively bullish on the market, it would be wise to take some profit in the near term. I am afraid that traders would take some significant profit in the coming days, based on the technical chart. If you see the ascending triangle pattern, the highest level might has been reached according to the tip of the point in the triangle. That’s the common rule in triangle pattern.

I also noted that there is a 50% chance that the JCI would form a “double top” pattern which is usually a bearish sign for traders. If it is the case, JCI could retrace to 2600 level. Hence, I think it would be wise to take some profit. Personally, I set 75%-80% as the target equity holding in my portfolio and 20%-25% as cash. If the JCI does retrace, I am expecting the JCI to reach a new high before the first semester of 2010.

Target for 2010

The market starts the trading day in 2010 with confidence and full of optimism. You guys might have your personal target for Jakarta Composite Index (JCI) this year. (Please join the poll at the bottom of my blog). Me personally, set 2950 – 3000 as the target for this year or around 15% - 20% return for full year 2010.

The commodity sector I believe would be the main index mover at the beginning of the year, with BUMI as my favorite stock in this sector. I set the TP for BUMI at 4000. The plan to double its production in 2012 would be the main factor to the price movement.

The other stock that I like from Bakrie group is ELTY. The Book Value of ELTY today is around 213. If ELTY could grow about 20% this year, its book value is expected to be at 250. With P/BV ratio of 2, I am expecting ELTY to reach 500 at the end of 2010 or more than 100% gain.

I also still like cement sector with SMGR as my top pick. I am expecting SMGR to grow 20% - 30% this year. With this projection of growth, I am expecting SMGR to reach 9000 – 10000 level this year. Since 2005, SMGR has been successful in growing its book value 20% every year. Hence, I believe it is not a difficult task for SMGR to repeat its growth story.

In banking sector, I would overweight BBRI. I am expecting BBRI to grow 15% - 25% this year. The yoy inflation rate in December 2009 at 2.78% is very likely to boost the credit consumption. The TP that I set for BBRI is at 9200.

Here is the summary of the target price of the index and some stocks that I picked:

	Price 2009	Target Price	Potential Gain
JCI	2534	3000	18.39%
BUMI	2425	4000	64.95%
ELTY	193	500	159.07%
SMGR	7550	10000	32.45%
BBRI	7650	9200	20.26%

October: Continue Rally or Pullback ?

We are entering the 4th quarter in lack of confident. The JCI was opened in red but it managed to close in slightly positive, up only 0.08%. The unemployment report in the US showed a new record low since 1983 with 9.8% unemployment rate.

In my observation, I noticed that there were some re-balancing portfolio activities in the market lately. Fund managers and foreign investors are tend to shift their portfolio into a lower beta stocks. It could be seen as a sign that the market might be in a higher volatility in a near term. Investors are trying to enhance their portfolio so that their portfolio risk would be lower.

With this risk aversion condition, I am expecting the market in a ranging trade with tendency to go down a little bit in this month of October.

(Source: Dongsuh Securities, edited)

The trading range would be in 2400 - 2500 level or if the market go down further beyond the 2400 level support it would test the 2300 level.

You could check my portfolio here : http://deroncapital.wordpress.com/

JCI is Approaching 2400 Level

It is not because today is a nice day to write a blog, since today is 07/08/09. The reason I post some words today is that the Jakarta Composite Index (JCI) is approaching the important 2400 level. Why I think this level is a crucial level is because in July 2007 the JCI had failed to pass this level. In August 2007, about 3 weeks after that failure, the JCI was able to start a huge rally that took it to a historical record high at 2800. On that failure, the JCI was having a retracement that last about 3 weeks. The retracement was around 61.8%, since its rally during March 2007 until July 2007.

Today, the JCI closed at 2349, 50 points away from this important level. Current rally, which was started on March 2009 has given the JCI 80% return. If you look at the trend line obviously you could see that this rally accelerating very fast. 80% gain in just 5 months.

While we are waiting for some unemployment data from the US tonight, I think it would be wise to get some cash aside and wait for this important economic data result. In the near term, I am expecting some retracement for some weeks. If the JCI could pass the 2400, I believe the JCI is possible in reaching a new historical high.

JCI, continuing rally or further correction ?

In the last 10 days, the Jakarta Composite Index (JCI) has significant pullback. The pull back in the commodities and the statement from the world bank which said that the global economy would shrink 2.9% in 2009, worse than its previous March forecast for 1.7% decline, are the main factors behind this pullback. While investors and traders are still in risk aversion state, I expect that the JCI would continue its rally in a few days ahead. I have some data that I would show you to support my opinion based on technical perspective.


(Source: Dongsuh Securities, edited)

This chart shows the "Fibonacci" retracement. The 23.6% Fibonacci retracement is arround 1910 level. This level could be seen as a strong support since its rally from 1245 level to its highest level at 2116. Today JCI has managed to closed slightly above this important support at 1914. I assumed that the market is ready to make a new rally in the coming days. I also have some data from some stocks that I covered. These stocks also has managed to closed arround its Fibonacci retracement level:

Fibonacci	BUMI	ADRO	JSMR	SMGR	LSIP
Retracement
23.60%	1946.22	1280.08	1525.24	4845.7	6308.8
38.20%	1711.89	1174.96	1392.38	4564.65	5695.6
50.00%	1522.5	1090	1285	4337.5	5200
61.80%	1333.11	1005.04	1177.62	4110.35	4704.4
100.00%	720	730	830	3375	3100

BUMI closed at 1660, slightly below its 38.2% Fibonacci retracement. ADRO closed at 1080, very close to its 50% retracement level. JSMR today has closed at 1490, slightly below its 23.6%. It could go further to 1392.38 or bounce back to continue the rally. SMGR is closed in green. On Friday 19 June 2009, SMGR managed to bounce back above its 50% level and continue the rally. LSIP has touched its 50% retracement level today (low of the day) but managed to close higher at 5500.

Based on this data, I expect JCI to continue the rally. ADRO, LSIP, SMGR and JSMR are likely to continue the rally along with the JCI while BUMI is in a neutral position.

Prepare for a mild correction..

Today the JCI closed down 1.7% from the previous day. I believe this is the start of a mild correction. The correction that we would have in the next one or two months would be more significant than the one that we have when the index reached 1470 level.

The rally that we had in the last 3o days was similar with the one that we had in last December and early January. Both rallies were able to reach a new high. The rally that we have in last December was followed with a correction in the next two months and reached its lowest in March. I believe the rally that we have currently would be similar with the December rally and I would expect the JCI to go down further to around 1300 level.

While there is still no evidence about the economic recovery in the USA, I would predict that the JCI would not be able to continue its rally this month. The World Bank also has cut its forecast for Indonesian growth to 3,4% that washed away investors confidence. If you look at the stochastic indicator, you would be able to find that obviously this is not the right time to buy.
When the index has reached around 1300 because of the correction, I believe that would be an ideal time to start accumulating again..

JCI.. Prepare for a little correction..

The Jakarta Composite Index (JCI) has gained around 13% this month. Is this rally could be maintained?


There is a strong resistance around 1440 level that has to be passed to maintain this strong rally. The index has failed to pass this level on early January this year. If we look at the stochastic indicator, we would conclude that obviously the index is in an overbought condition. It has risen for 5 days in a row therefore I would expect a little correction in a next few days. In my view, the index would be in a range of 1350 - 1470 this week.

While IDR is still in a good shape against the USD at 11400 per dollar, I would expect that the rally could be maintained in a medium term. My concern is while we are approaching the presidential election some traders would take a safer position so I am expecting there would be some liquidation in the near future. I expect the index not to pass the important resistance at 1440 level this week or two but in the medium term this rally positively could be maintained.

Prepare for a big rally this week

After a long weekend, the JSX showed a little sign of recovery. At least there are two indications why I would suggest that the Indonesian market would be in a good upward movement this week. The first thing is that the Jakarta Composite Index has managed to close above a crucial level at 1300.22. This close slightly above 1300 indicated that investors and traders are confidence that the market would be starting a rally this week.





The second indication is that in the last few days the USD / IDR has shown a sign of strong resistance around 12000 level. It could be interpreted as a sign that the IDR would not go lower than 12000 level hence foreign investors would be more confidence exchanging their USD to local Indonesian rupiah (IDR) without worrying that the value of their funds would be reduced by the IDR depreciation relative to USD. It would also suggest that foreign investors would be prefer to invest in equity market since the Bank of Indonesia has reduced its benchmark rate to 7.75%, which is not so interesting to invest in Indonesian government bonds.



I also noted that some foreign brokerage firms have been net buy in Indonesian stocks such as Kim Eng Securities, Credit Suisse, UBS, ABN Amro Asia Securities, Deutsche Securities. I would say that with this new confidence in the Indonesian market, our capital market would start a rally this week.

Indonesian equity market is still in a high volatility condition as what has been happening in global equity market. Here is some good technical post from www.decisionpoint.com about S&P predicted movement for the coming weeks ahead.

Breakdown Points to Lower Prices
by Carl Swenlin
September 5, 2008

On August 15 I wrote an article pointing out that an ascending wedge had formed on the S&P 500 chart. I noted that this is a bearish formation, and that the most likely resolution would be a breakdown from the wedge followed by a price correction. The breakdown did in fact occur two days after I made my comments, but the correction did not immediately follow. Instead prices moved sideways for about two weeks before finally breaking down again on Thursday, belatedly fulfilling the expectation of a correction. Now we must ask if this is the beginning of a deeper correction or if it will merely end as a successful retest of the July lows.

The first evidence to consider is that we are still firmly in a bear market, and the down trend is clearly visible on the chart below. Another worrisome sign is that the PMO (Price Momentum Oscillator) has topped below the zero line, which should always be viewed with apprehension, particularly when it occurs at the end of a rally.

The next chart shows our On-Balance Volume (OBV) Indicator Set. The Climactic Volume Indicator (CVI) measures extreme OBV movement within the context of a short-term OBV envelope for each stock in the index. The Short-Term Volume Oscillator (STVO) is a 5-day moving average of the CVI. The Volume Trend Oscillator (VTO) summarizes rising and falling OBV trends. These charts tell us if the index is overbought or oversold based upon volume in three different time frames. All three are giving us useful information at present.

The CVI recently hit a climactic top just before the price break forced a climactic CVI low. Since this CVI low occurred in conjunction with a price trend change, I assume that it is an initiation climax that will lead prices lower. The STVO supports this conclusion because it is topping in overbought territory. The VTO, is not particularly overbought, but you can see that it is topping at the same level as it did at previous price tops.

It is also worth mentioning that September is historically one of the worst months of the year, and the market is entering this dangerous period in a very weak condition. A crash is not out of the question, although, that is not a prediction, just a caution to not get too anxious to pick a bottom.

Bottom Line: While positive outcomes can and do happen during bear markets, the odds are strongly against them. Another decline has emerged out of a short, weak rally, and I think that a continued decline is more likely than a simple retest of the July lows.

We rely on our mechanical trend models to determine our market posture. Below is a recent snapshot of our primary trend-following timing model status for the major indexes and sectors we track. Note that we have included the nine Rydex Equal Weight ETF versions of the S&P Spider Sectors. This may seem redundant, but the equal weighted indexes most often do not perform the same as their cap-weighted counterparts, and they provide a way to diversify exposure.