Is JP Morgan's call of RM3.50 for Top Glove valid?
Updated
I believe JP Morgan's call for RM3.50 is a valid call. Fundamentally, the company is making money but this is a seasonal business. Top Glove won't be able to sustain such a business volume forever. With vaccines coming out, the business volume of Top Glove will certainly be in downward trend. If a business comes because of covid-19, it will leave when covid-19 becomes a history. That is basic logic.
Putting fundamental aside, let see what is the chart telling us after a new high was made on 7th August 2020. The chart shows a clear double top formation which is always a bearish chart pattern. However how can we dive in deeper to get some confirmation on that? Elliot's wave theory of impulsive move 12345 and corrective move ABC are in play in this chart.
Right after 7th August new high was made, immediately a sell off happened. The correction from 7th August to 10th September can clearly be seen as a wave A correction move. How do we know that? Because the wave consists of a small "abc" move. The first "a" move was between 7th August to 17th August, a move from 9.765 to 7.135. Then immediately from 18th August to 24th August we saw a bounce to 9.505 which is a "b" way move up. B wave always is a small impulsive move up. Then immediately followed by a "c" wave move down again to 6.15 on 10 September. This first cycle completed the first impulsive A wave move down.
Then we saw a capital B big wave move up from 11th September to 16th October then sent TG to 9.72 range again. This move is a B wave up movement mainly because it consists of 5 smaller waves called 12345. But this wave got rejected again at 9.70 range. In my chart, you can clearly see all 5 waves that I have labelled them in blue. This therefore gives more weight to call it a B wave.
Next final move is of course the C wave down again. How far can we see this C wave goes? C wave can go as far as 168% of A wave's length. In other words, it means 1.68 times longer than the downward move between 7th August to 10th September. How long was August A wave move? It was 9.765 - 6.15 = 3.615. So a 168% extension of this move will give us 6.0732 downward pressure. Just substract 6.0732 from a recent high made on 19th October will give us a possible target price for next move which is 9.72 - 6.07 = 3.65. So yes, next bearish move of this C wave will possibly send TG down to 3.65 level. This level is also a Fibonacci 78% retracement level from the swing high made in August and swing low made in March 16, at about 1.90. And therefore this is the confluence area of how low TG price could go.
For now, for TG to be in bullish momentum again, it needs to break and close above 7.20 level to see further upside momentum.
In conclusion, through technical perspective wise, RM 3.50 call is possible. However this is not a financial advice, always do your own research. Thank you!
Putting fundamental aside, let see what is the chart telling us after a new high was made on 7th August 2020. The chart shows a clear double top formation which is always a bearish chart pattern. However how can we dive in deeper to get some confirmation on that? Elliot's wave theory of impulsive move 12345 and corrective move ABC are in play in this chart.
Right after 7th August new high was made, immediately a sell off happened. The correction from 7th August to 10th September can clearly be seen as a wave A correction move. How do we know that? Because the wave consists of a small "abc" move. The first "a" move was between 7th August to 17th August, a move from 9.765 to 7.135. Then immediately from 18th August to 24th August we saw a bounce to 9.505 which is a "b" way move up. B wave always is a small impulsive move up. Then immediately followed by a "c" wave move down again to 6.15 on 10 September. This first cycle completed the first impulsive A wave move down.
Then we saw a capital B big wave move up from 11th September to 16th October then sent TG to 9.72 range again. This move is a B wave up movement mainly because it consists of 5 smaller waves called 12345. But this wave got rejected again at 9.70 range. In my chart, you can clearly see all 5 waves that I have labelled them in blue. This therefore gives more weight to call it a B wave.
Next final move is of course the C wave down again. How far can we see this C wave goes? C wave can go as far as 168% of A wave's length. In other words, it means 1.68 times longer than the downward move between 7th August to 10th September. How long was August A wave move? It was 9.765 - 6.15 = 3.615. So a 168% extension of this move will give us 6.0732 downward pressure. Just substract 6.0732 from a recent high made on 19th October will give us a possible target price for next move which is 9.72 - 6.07 = 3.65. So yes, next bearish move of this C wave will possibly send TG down to 3.65 level. This level is also a Fibonacci 78% retracement level from the swing high made in August and swing low made in March 16, at about 1.90. And therefore this is the confluence area of how low TG price could go.
For now, for TG to be in bullish momentum again, it needs to break and close above 7.20 level to see further upside momentum.
In conclusion, through technical perspective wise, RM 3.50 call is possible. However this is not a financial advice, always do your own research. Thank you!
Note
TG price has broken RM 6.11 today, one of the major support lines. This is an alarming sign to bulls. If bulls fail to protect this level by 5pm today, likely more selling off will take place in days ahead.Note
RM 6.11 could be flipped to be major resistance line.Note
If RM6.11 is flipped to be major resistance line, trading prices ahead will be below this range.Note
A close below the RM 6.11 line, will be first sign of double top formation pattern.
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