Is Olam International Falling Apart?

5 December 2012


Olam International (ticker O32 in SGX) was attacked by Muddy Water (MW) who had a “strong sell” for this counter. MW also claimed that the capital (bonds and warrants) recently raised by Olam "solve nothing";  it only prolonged the debt problem. Some market players also had this perception and was of the view that the recent Olam’s effort to raise capital had also the diluting effect. Lets examine Olam’s future from the charts.

The Olam’s Chart

The Olam’s trading chart will show that Olam’s price has been going down trend since NOV 2010.  It did not stop sliding.   Will it continue to slide?

The Big Triangle Trading Pattern

Since Dec 2008, Olam has been forming this big triangular trading pattern. The price cut below the pattern on 27 Nov 2012 when MW attacked it by saying in one conference that Olam would be in financial trouble. Though the price recovered the second day, it soon dropped below again. 

On 4 December 2012,  Olam announced that one of its White Knights, the Temasek of Singapore, was backing its fund raising of SGD$1.50 Bil. But the price failed to pickup;  instead, it closed at the day's low of 1.60,  below the triangular red line.

What’s ahead?

It is not immediately clear if Olam price is forming a bear flag although there are symptoms such as falling volume and negative MACD etc. It will be clearer if the future trading prices do not go above the triangle red line with the price,  forming rising channel or triangle trading patterns and the trading volume,  continuing to fall.

Trading Recommendation

Unless Olam can show that it can make good earnings in the future or its knights can shore the price up, it is likely that the price will tank.  This counter is only good for day trading at the moment.

Disclaimer: The author has no position in this counter. Please verify any information if it is used for trading purposes.

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