The Alpha Trader

AWC BHD (7579) - A STOCK WITH POSITIVE DIVERGENCE

TheAlphaTrader
Publish date: Fri, 08 Dec 2023, 12:21 PM
With over 20 years of trading experience in financial markets, this blog is intended to share with fellow traders how I identify good trade setups from a combination of fundamental, technical and situational considerations

Stocks on Bursa Malaysia have been languishing in recent months with little excitement from thematic plays and news flow driven rallies. We had some nice sectoral moves in property stocks and the renewable energy space, but both seemed to have tapered off as well. So, where do we look for new trading ideas? To find answers, we should look at stocks that exhibit technical strength in the current bear market. In the past, we have picked up good trending stocks way before any positive news flows actually emerged, most notably EG Bhd and Systech Bhd.

AWC Bhd (AWC) meets our technical trading setup criteria with positive divergence in the face of the overall bearish sentiment. 


CHARTS


The recent motive move in AWC began in mid September 2023 from the RM0.45 level. AWC hit a 52 week high on 11 November at RM0.665 on increasing volume traded. However, it took a dip on 28 November perhaps due to the slight disappointment in the quarterly profits. However, on a positive note, the RM467k profit was still a vast improvement from the loss of RM13 million the quarter before, which was largely due to impairment cost.

From a technical perspective, the retracement was solidly defended at the RM0.55 level, which now acts as a very strong major support since it was the pivot breakout point from the previous motive move. Price action suggests that any negative news should have been digested with the positive technical move off the RM0.55 level.



Going forward from the weekly charts, we can clearly define a first target zone of between RM0.75 to RM0.90. If this resistance zone can be taken out convincingly, we can clearly aim for a retest of the all time highs near the RM1.20 levels last seen on 2017.


POSSIBLE CATALYSTS

    1) STREAM GROUP SDN BHD ACQUISTION

    Recent interest in AWC could be driven by the announcement its purchase of the remaining 49% interest in Stream Group Sdn Bhd, which they do not already own from Premium NXL Sdn Bhd for RM110 million. The proposed acquisitions will allow AWC to obtain full control of Stream Group to drive its future strategic direction and growth. 

    This will contribute significantly to the bottom line of AWC, given that the profits from Stream alone in 2022 of RM23.42 million was even more than AWC’s profit of RM21.53 million for the year. The EGM to vote for the acquisition will he held on 13 December 2023.


    2) GROWTH PHASE IN STREAM GROUP’S AUTOMATED WASTE COLLECTION SYSTEM (AWCS)

    As quoted from The Edge, the adoption for Stream Group’s AWCS is on the rise in markets like Singapore, Indonesia and Saudi Arabia. This could serve as the multi-year growth engine for AWC in the years to come.


    CONCLUSION

    AWC could be a stock to watch in 2024 with good technical price action and possible fundamental catalysts to come. All negative news should have been priced in to the stock.Alpha Trader always believes price moves before news and price action must be respected and acted upon! Wishing all readers an Awesome Wondeful Christmas!!





    Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

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    2 people like this. Showing 3 of 3 comments

    Lsly88

    Tq Alpha Trader..hoot9e..looking forward for an early christmas celebration.

    2 months ago

    Dkk08

    I follow your EG and Systech articles earlier.. have a good year for 2023.. TQ. I will follow this also. Thanks 🙏🙏

    2 months ago

    Chang Keit Siong

    Hehe.. push more for SYSTECH

    2 months ago

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