MACD: Moving Average Convergence Divergence

When come to technical analysis, one of the most commonly used tools is the Moving Average Convergence Divergence (MACD). In MACD there are two lines which is the signal line and the MACD line. The MACD is form by subtracting the 26-day EMA from the 12-day EMA and the signal line is the 9-day EMA. Besides the two lines, you will also notice that there is a histogram plotted in the tool. When the two lines are closer to each other or converging together, the bar in the histogram is getting shorter. As the two lines are moving further to each other or diverging, the bar in the histogram is getting higher. However, we don’t need to know how the line is calculated because most of the technical analysis tools are well ready to be used in most of the charting software for example ChartNexus. All we need to know is how this tool gives us the trend of the stock as a reference for trader to make their decision.

In MACD, the signal line which is the 9-day EMA is known as the slow line and the MACD line is known as the fast line. The fast line will react more quickly to the price movement compare to the slow line. Hence, the fast line will eventually move closer to the slow line when there is a trend changes or new trend is occur. When the fast line and the slow line converge, a crossover occurs before the fast line start to diverge from the slow line.

Chart taken using ChartNexus

Hence, the crossover points that occur give us the indication of the current trend of the stock. If the fast line crossed the slow line and move downward under the slow line which indicated as point A in the chart above, a new downtrend is form. The fast line will continue diverge downward under the slow line which will cause the histogram goes bigger toward the negative direction. The size of the histogram indicates how strong the trend is.

Vice versa, if the fast line crossed from below the slow line and move upward above the slow line which indicates in point B in the chart above, a new uptrend is form. The size of the histogram will change accordingly to the divergence of the two lines and indicate how strong the uptrend is.

The MACD seem easy to use but there is a disadvantage for using this tool. The MACD is calculated from the moving average which is from the historical price and hence the signal given by this tool is lag behind the current market price. Hence it is believe that if a strong uptrend is indicated by MACD, the current trend will still continue the uptrend until the uptrend goes week. Well, this tool is just to provide a reference for trader in helping them making trading decision. The volume and the fundamental of the stock is still the main aspect to look at in stock trading.

YTL Power International

YTL Power International is a company where its business field is in power generation, distribution and production. YTL Power International has a portfolio of steady concession businesses. Based on their previous record, this company also provides a dividend per share (DPS) of more than 13sen each year. Hence, it is a choice for investor that looking toward for a stable company that can give a good dividend annually. On behalf of that, the share price is also not expensive compare to other company at a same rank. This is also why I’m interested in this company as I don’t have a huge modal to buy expensive share like Genting, Nestle, Digi and other banking counter.

YTL Power International is a multinational powerhouse. Their power generation business is not just concentrated in Malaysia but also in Singapoer (Power Seraya), Indonesia (Jawa Power) and also involve in power transmission in Australia through Electranet which is 33.5% owned by YTL Power. The power generation assets of YTL power are multi-fuels which are oil, gas and coal. It is operate under different power purchasing agreement.

Besides active in power generation industry, YTL Power also involve in Telecommunication in Malaysia, water and severage services in the United Kingdom and also oil and gas industry in Jordan. YES which is the broadband service widely used in Malaysia is also the project that YTL Power involves. Looking in their business operation, I believe that YTL Power is good choice to me for a long term investment.

Please note: The above opinion is my investing thoughts. It only serves as a blogging activity. The opinion is neither an investment advisory nor an investment tips. The author does not recommend readers to buy or sell any securities. It is fully your responsibility for the consequences of using the information in this site

Welcome to "Beginner at Malaysia Stock Investment"

Good day and welcome to “Beginner in Malaysia Stock Investment”. From the title of the blog, it is clear that this blog will be blogging about investing in Malaysia Stock from the point of view of a beginner. Yes, the “beginner” here is referring to me. I’m just a ordinary guy which don have a financial background in my education background but starting to learn about how to invest in Malaysia Stock and make some extra income. Such blog is not something new in the blog sphere as there are already tons of blog about stock investment. However, I do hope that I can make a different for this blog in the meantime of learning to invest in Malaysia’s stock.