VICOM: Powerful Analysis – What Could Happen (Technical POV)

With the recent growth in talks about VICOM, I decided to take a look at this company myself as well. I will be following up on this post with more fundamentals perhaps some time in June or July when I’m back but I’ll make do with the little time I have here before I fly off for the month of May! As per my standard routine, my preliminary search always begins with the charts.

Personal Stand:

I’ve been reading different blogs on VICOM and have started seeing people take a vested interest in it and it has caught my attention. Personally, I’m looking to go long it, but have yet to decide on the entry price. I will explain in detail why I’m caught in such a dilemma below with charts. From what I gathered, fundamentally, VICOM is a good company to be vested in, having a thick moat around its business and with the current auto vehicle overcrowding issue in Singapore, it spells good news for the company. But what price do I go in at?

Scope of Research:

I will attempt to (1)depict my thoughts on the various time-frame of VICOM’s charts, (2) determine the possible outcome(s) and (3)buy-in price of VICOM based on the time-frame.

Let’s Get Started!

Positive Scenario 1-1: Uptrend line resumes

Scenario 1-1

The overall trend of VICOM is impeccable. It’s been on an uptrend for at least 12 years (Somehow this is the furthest I could zoom out on my laptop). If we consider taking on a position, it would definitely be to take on a long position on a multi-year investment time horizon.

Currently what I’m able to observe is a potential double-top formation being formed and prices is on it’s way to test the neckline support which is reinforced by the uptrend line at 5.80. The selling appears to have strength to push it down to find a stable support level as observed by the increase in volume in the weekly chart.

Positive Scenario 1-2: Has the support already been found or..

Scenario 1-2

For traders, it’s an excellent opportunity to buy into an ever-rising stock with most technical indicators indicating an oversold condition and should be expecting a good upward movement to potentially test 6.50, the previous support/resistance line.

Negative Scenario 2-1: When the double-top is real..

Scenario 2-1

This could spell quite a major disaster that investors could fail to see and the damage could be colossal. If the bear flag after the breakdown happens, it’s going to spell some more trouble.

Negative Scenario 2-2: Or Am I Thinking Too Much?

Scenario 2-2

I honestly could have been thinking too much about the potential negative downfall (Without discrediting the potential damage of the double-top breakdown from neckline). What could happen is from Scenario 2-2, we go back to Scenario 1-1 where prices go to test 5.80.

Conclusion:

Anything could happen, and having laid out the possibilities (Both positive and negative in dual time-frames), I feel better prepared when I consider buying into VICOM. My technical analysis can only tell me what my likely entry/exit prices can be, but when it comes to investment, there’s the fundamental analysis part that I’m lacking in this post.

If you are interested in VICOM, there is a really good fundamental analysis on VICOM by B which really is worth the read. In his post, there are 4 more past analyses on VICOM which you can refer to and I believe he has covered much of the business in detail!

Read here: Vicom Q1 FY15 – An Epic Wave Of Carmageddon Coming?

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One thought on “VICOM: Powerful Analysis – What Could Happen (Technical POV)

  1. With the crazy COE price, it is entirely possible that many folks who bought the car on cheap years ago would decide that they could no longer afford a car and scrap them.

    Extending the CEO for 5 yrs will set you back by more than 30K+ and you can’t take a loan for it. Hence, I doubt reregistration will maintain at low level.

    It is likely that the existing car owners that are on the margin would scrap their cars and get replacement cars that are 7-8 years old so that the cash outlay would be much lesser and get to use a newer car.

    Vicom’s profit is highly correlated to the aging and expansion of Singapore’s car population. With vehicle growth limited to 0.25% per year (might be cut in the future due to increase in congestion) and impending tsunami De-registration of old cars, Vicom’s prospect doesn’t looks good to me in the next 3 years. But the cycle will prob pick up again in 3 yrs time. 😉

    Like

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