TECHNICAL ANALYSIS

(FIN 382)

FACULTY OF BUSINESS MANAGEMENT

DIPLOMA IN INVESTMENT ANALYSIS (BA114)

JBA1145D

PREPARED BY:

NO. NAME UITM ID

1. MUHAMMAD ADI MUZAFFAR BIN MOHD ROSLI 2020826598

2. ZAREEF HARRIS BIN IZMAN HARRIS 2020815392

3. MUHAMMAD HAFIZ DANIAL BIN MOHD FAIRUZ 2020830566

4. ISMAIEL IZZANEY BIN IBRAHIM 2020833826

5. MUHAMMAD HAZIQ IMAN BIN MAT SABRI 2020845988

6. MUHAMMAD FAEZ BIN KHAIRUL AMRI 2020846376

PREPARED FOR: MADAM NIK NUR SHAFIKA BINTI MUSTAPHA

SUBMISSION DATE: 12th JANUARY 2022

 Table of Contents

5.1 Introduction 2
5.2 Indices 4
5.2.1 KLCI Index 4

5.3 Comparative Analysis 8

5.3.1 Nestle Malaysia versus KLCI 8

5.4 Trend Analysis 10

5.4.1 Trendline,Support and Resistance (year 2019 - 2021) 10

5.5 Indicators 12
5.5.1 Simple Moving Average 12
5.5.2 MACD 12
5.5.3 Relative Strength Index 12
5.5.4 William %R 13
5.5.5 Stochastic Oscillator 13

5.6 Market Timing Indicator 14

5.6.1 Short Term (31 days) – Dec 2021 14
5.6.2 Intermediate (60 days) (Nov – Dec 2021) 16
5.6.3 Long Term (90 days) (we take from Oct – Dec 2021) 18

5.7 Conclusion and Recommendation 20

References 22

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 CHAPTER 5
TECHNICAL ANALYSIS
5.1 Introduction
Technical analysis forecasts market action using recognisable chart patterns and
mathematical indicators. It is predicated on the notion that a trader may create a reasonably
accurate prediction of future price trajectories provided they can recognise historical market
patterns. One of the two main schools of market analysis—the other being fundamental
analysis—is this one. Technical analysis is only dependent on an asset's price charts, unlike
fundamental analysis, which considers both intrinsic value and external factors to determine
an asset's "real value." The only way to forecast future movements is to identify patterns on
a chart. Based on Credit Suisse, a chart is a mirror of the mood of the crowd and not of the
fundamental factors. Thus, technical analysis is the analysis of human mass psychology.
Therefore, it is also called behavioral finance.

The fundamental principle underlying technical analysis is that the market price
reflects all available information that could influence a market. As a result, there is no need
to examine economic, fundamental, or new developments because they have already been
priced into a given security. When it comes to the market's overall psychology, technical
analysts generally believe that prices move in trends and that history tends to repeat itself.
Chart patterns and technical (statistical) indicators are the two main types of technical
analysis.

Chart patterns are a subjective type of technical analysis in which technicians use
specific patterns to identify areas of support and resistance on a chart. These patterns,
which are supported by psychological factors, are intended to forecast where prices will go
following a breakout or breakdown from a specific price point and time. An ascending
triangle chart pattern, for example, is a bullish chart pattern that indicates a key area of
resistance. A break through this resistance could result in a significant, high-volume upward
move.

Technical indicators are a type of statistical technical analysis in which technicians

apply various mathematical formulas to prices and volumes. Moving averages are the most
common technical indicators, which smooth price data to make it easier to spot trends.
Moving average convergence divergence (MACD), a more complex technical indicator,
examines the interaction of several moving averages. Many trading systems rely on
technical indicators because they can be calculated quantitatively.

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 To sum up, technical analysis allows traders to make decisions based on the price
changes, trends and historical prices as well as the market sentiment. It helps to ensure at
what price it might be wise to open or close a position more accurately. Although technical
analysis is one of the main tools for trading, it should be used with other tools such as
fundamental analysis in order to achieve an optimal and more successful trade.

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5.2 Indices
5.2.1 KLCI Index

Figure 1: FBMKLCI Chart from 2019 to 2021

The FTSE Bursa Malaysia KLCI Index is a major stock market index built up by the
top 30 businesses on Bursa Malaysia's Main Board by total market capitalization. When it
was introduced on July 6, 2009, it replaced the Bursa Malaysia KLCI Index, which began at
its closing value on July 3, 2009. It is a free-float with a minimum of 15%,
capitalization-weighted stock market index. Based on the figure above, the movement of
the FBM KLCI was in a downtrend from the beginning of 2019 until the beginning of 2020
where the market went down a deep slope in March 2020. On the last trading day of 2019,
the FBM KLCI lost ground. The benchmark index fell 26.91 points, or 1.67%, to end the year
at its intraday low of 1,588.76, as the overnight decline in US stocks weighed on Asian
market sentiment. The KLCI fell 6.02%, or 101.82 points, for the year, making it Asia's
third-largest percentage decline after the Laos Securities Exchange Composite and the
Mongolia Stock Exchange Top 20. Despite that, the KLCI has gained 315.98 points, or
24.83%, from 1,272.78 on December 31, 2009.

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 Moving on to the year 2020, the FBM KLCI fell below 1,300 after the market break,
marking a drop to levels not seen in a decade as investor sentiment continues to decline.
The benchmark index dropped 65.39 points, or 5.11%, to 1279.36, its lowest level since
mid-2010. Market breadth remained negative, with 916 decliners outnumbering the 54
gainers on the local exchange. Nestle (M) Bhd topped the decliners list as it fell RM4 to RM
131.10, followed by Dutch Lady Milk Industries Bhd and Carlsberg Brewery Malaysia Bhd.
Based on the article reported by theedgemarket.com, at the time of writing 2.79 billion
shares had been traded, worth RM2.08 billion. To mitigate the economic impact of the
COVID-19 pandemic, the US Federal Reserve has announced a cut in interest rates to a
target range of 0% to 0.25%, as well as a US$700 billion quantitative-easing programme.
MIDF Research said today that it expects the US to keep interest rates unchanged and that
a negative policy rate is unlikely, as it may opt for more quantitative easing to inject liquidity.
The current 0%-to-0.25% level on top of the US$700 billion asset purchase programme
would be a big boost to domestic demand as the cost of credit for consumers and
businesses are very low. However, the FBMKLCI began to bounce back in April 2020 and
began an uptrend until it reached its previous price earlier in the beginning of 2020.

On the other hand, the COVID-19 crisis had become more foreseeable. What was
formerly referred to as a “Chinese problem” and later an “Italian problem” is now referred to
as a “global problem”. As a result, governments were forced to adopt more harsh
anti-recession measures. Governments, with few exceptions, initially downplay the disease
before it spreads widely among the populace. Then they employed extreme social distancing
measures like job and school closures to further isolate themselves. Since the recession,
COVID-19 has significantly shaken the global economy and financial markets. All of this was
attributable to the virus’ highly contagious nature and the inevitability of its explosive spread
during the epidemic’s ’acceleration stage.’ As this disease is widespread, highly contagious
sickness was detected, prompting investors’ minds to be flooded with negative thoughts and
concerns. The COVID-19 epidemic has had an impact on the stock market in Malaysia. As
of March 27, 2020, the KLCI had plummeted 20.52% since the beginning of the year,
reaching its lowest levels in a decade. Furthermore, it is also reported that the COVID-19
pandemic has two effects on the stock market. Firstly, the pandemic put a halt to commercial
and corporate operations, which then had an effect on the stock system. Secondly, the
confusion surrounding the COVID-19 cases affected investors’ investment decisions,
resulting in increased volatility in the stock market. As a result, many businesses, regardless
of their size, faced liquidity issues which subsequently led to three organizations which are
the World Bank, the Asian Development Bank, and the International Monetary Fund
allocating a total of 68.5 billion dollars to assist the affected countries.

5
 In 2021, the FBM KLCI continued its downtrend from late 2020 until August of 2021
despite the FBM KLCI beginning the year strongly, closing the first trading day at 1,602.57
points due to the reopening of the economy sector, development of the Covid-19 national
vaccination programme in late 2020 and the lift of movement control order restrictions.
However, as Covid-19 infections increased and limitations were re-imposed, the positive
momentum was short-lived. On January 12, a state of emergency was declared, which
caused a bearish equity market. The FBM KLCI ended that day with a small decrease from
its previous finish of 1,617.25 points, closing at 1,612.04 points. Furthermore, the market
was also affected due to increased selling pressure at the beginning of the new year,
according to Inter-Pacific Research Sdn Bhd, with glove stocks plummeting the most in
about two months after regulated short-selling activity resumed. On March 10, the FBM KLCI
reached a record high of 1,639.83 points, helped by improved Wall Street performance and a
decline in the average daily domestic instances of Covid-19. On August 6, Malaysia had a
record-breaking 20,889 new Covid-19 infections, the most since the epidemic hit the country
in February of 2020. As a result, the index fell to a low of 1,489.80 points.

Furthermore, The American Rescue Plan Act of 2021, a US$1.9 trillion (RM8 trillion)
stimulus programme passed by the United States in reaction to the epidemic, signalling the
global economic recovery initiatives, was also passed during March of 2021. The optimism
at the time, however, was dampened by a wave of cases caused by the Delta variant. In
addition, political instability has also affected the performance of the FBM KLCI. The FBM
KLCI closed at 1,494.60 on July 20, 2021, the day UMNO officially withdrew its support from
the governing coalition. Subsequently, the appointment of Datuk Seri Ismail Sabri Yaakob as
prime minister on 20th of August managed to make the market resume its bullish trend as
investors favour the political clarity. Following the swift appointment of a new Prime Minister
and the government's decision to relax restrictions for individuals who are completely
immunised in the continuing lockdown, local equities have been rallying during the period.
With RM153.6 million in net offshore purchases recorded on 24th of August, foreign capital
was considered to be returning to the market. Retail investors net sold RM48.4 million in
stocks, while local institutions net sold RM105.2 million. However, the spread of the Delta
strain of the Covid-19 virus and increased regulatory scrutiny in some of China's economic
sectors recently impacted optimism in the Asian area, but it also served to ease concerns
over whether the US Federal Reserve will stop monetary assistance. Following the release
of the Budget 2022, presented by former Finance Minister Tengku Datuk Seri Zafrul Abdul
Aziz, the FBM KLCI dropped by 31.4 points, or 2%, to 1,530.92 from 1,562.31 at the
previous closing. Even though the budget had the largest allocation ever, the business
community had concerns about the "Cukai Makmur" one-time prosperity tax, which imposes

6
a 33% corporate tax rate on earnings over RM100 million. Based on Bank Negara Malaysia
(BNM), the ringgit fell 2% against the US dollar in November, while the FBM KLCI fell 3.1%
as the inflation in Malaysia increased to 3.3%.

On top of that, a new coronavirus variant, known as Omicron, was discovered on

November 24 and immediately began to have an impact on international markets. Initial
research has revealed that the strain is more contagious than the Delta variation that caused
the prior wave of infections. According to CGS-CIMB, only five of the 30 businesses on the
KLCI reported m-o-m gains, while the other 25 reported losses. Towards the end of 2021,
the market rallied as market sentiment has improved as a result of the successful advances
in the battle against Covid-19 based on studies from research house, Inter-Pacific Securities
Sdn Bhd. Overall, the FBM KLCI has contracted by 6.89% from 2019 to 2021. Compared to
other regional indices which are Singapore, Thailand and Indonesia, with reported returns of
9.16%, 12.91% and 9.97%, respectively, the FBM KLCI underperformed in 2021 with a
negative return of 5.73%.

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5.3 Comparative Analysis
5.3.1 Nestle Malaysia versus KLCI

Figure 2:Nestle Malaysia versus KLCI from 2019 to 2021

The performance of our company, Nestle Berhad and FBM KLCI, from 2019 to 2021
is depicted in the graph above. The company's performance will last from 1 January 2019 to
31 December 2021. Nestle Berhad began the year 2019 with a little increase in February,
which was caused by taking into account the divestiture of chilled dairy in January 2019.
Another argument is that strong sales contributed to the company's performance. Then,
Nestle Berhad has a downward trend, which is shared by the FBM KLCI. The chart for
Nestle Berhad indicates a decline in July 2019 as a result of the Covid 19 epidemic.The
COVID-19 epidemic had a large and negative impact on the FBM KLCI market price, and the
KLCI chart also shows a downward trend, which caused Malaysian exports to climb less
than anticipated.

During the COVID-19 outbreak, the FBM KLCI market experienced a negative impact
that hampered all economic activities. Furthermore, the FBM KLCI has been steadily
decreasing since January 2020, approaching a low of 1,219.71 on March 19, 2020, the
second day of the Movement Control Order (MCO), a Malaysian government initiative to
combat the COVID-19 pandemic. Since this disease is pervasive, extremely infectious
sickness was discovered, filling investors' minds with deleterious thoughts and concerns.
The COVID-19 epidemic has had an effect on Malaysia's stock market. The KLCI had
dropped 20.52% since the beginning of the year as of March 27, 2020, approaching its

8
Nestle Berhad and FBM KLCI both displayed a downward trend in 2020. According to
research from Maybank Investment Bank, as 2020 draws to a close, Nestle Malaysia Bhd
will experience weak domestic sales and exports as the Covid-19 epidemic continues to
have an immediate impact on demand worldwide. It has also been predicted that their
earnings for FY20-22 will fall by -6%, according to Maybank IB, who also noted that raw
material costs, such cocoa, have continued to rise, which has been found to have an effect
on gross profit margins.As Nestle aims to expand its Maggi Noodle facility and invest on a
production line for a new, unnamed product category, Maybank IB raised their capex
assumption for Nestle. Nestle would concentrate its efforts in the upcoming time on
collecting a greater number of e-commerce sales, it was further said. The movement control
order (MCO) had a detrimental impact on domestic sales, which led to Nestle's 1Q20
earnings falling short of expectations; however, this was largely offset by stronger overseas
sales. Only 26% and 27% of Maybank IB's and consensus full-year projections were
reached by the quarter's core net profit, which was RM187mil, a 21% year-over-year
decrease.Nestle's strongest quarter, the first quarter, usually accounts for 33% to 34% of
full-year earnings, but not this year. The KLCI then dropped to a 4-1/2-year low of 1523 in
early February 2020, but the chart shows that during the following six months in 2020, KLCI
made a return from a downtrend to an uptrend from 9 March 2020 until 27 July 2020 as a
result of The news that Prime Minister Muhyiddin Yasin will establish an economic panel to
deal with a number of concerns harming the country's economy, including a virus outbreak
and a steep decline in oil prices, caused the Malaysian stock exchange to jump 23 points or
1.6% to 1,453 on March.

Additionally, the FBM KLCI exhibits a sideways movement in 2021. It's because, on
Monday at around 3:00 PM Kuala Lumpur time, news that the Kuala Lumpur-Singapore High
Speed-Rail (HSR) project had been scrapped because of the COVID-19 pandemic's effects
on the nation's economy caused the FTSE KLCI to fall 19 points, or 1.2%, to 1,608. The
recovery movement control order (RMCO), which was supposed to conclude on December
31st, has now been extended by the Malaysian government until March 31st. Monday saw
1,704 new viral cases recorded across the country, bringing the total number of infections to
119,077. In terms of data, the Malaysia Manufacturing PMI increased in December as the
economy continued to recover from the epidemic, reaching its highest level in four
months.Imports into Malaysia unexpectedly increased by 1.6 percent year-over-year to MYR
75.0 billion at the end of January 2021, surpassing the market consensus of a fall of 2.9
percent and coming after a drop of 9 percent in the previous month. Due to the coronavirus
pandemic, imports increased for the first time since February. Consumption-related shipment
arrivals increased by 3.3 percent, while imports of capital and intermediate products

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decreased by 2.0 and 5.0 percent, respectively. Arrivals grew 13.0 percent and 2.7%
respectively from China and the ASEAN nations, while they decreased by 2.4 percent from
the US. Singapore saw a decrease in imports (-10.3 percent). When looking at the entire
year of 2020, imports decreased by 6.3% to MYR 796.2 billion. For Nestle Berhad, their
2021 chart displays a downtrend pattern beginning in January 2020 and ending in December
2021, although The Group's Turnover for the first nine months ending September 30, 2021,
increased by 5.6% to RM4.27 billion from RM4.04 billion in the same period the previous
year. This was mostly caused by domestic sales, which increased by 6.3%, as retail F&B
sales increased by 6.2%. The resilience of Nestle Berhad's company and operations is
shown in the growth of their earnings and sales for the first nine months of the year. The
safety of all employees and business partners, as well as maintaining a steady supply for
their consumers, have remained Nestle Berhad's top concerns.

10
5.4 Trend Analysis –
5.4.1 Trendline,Support and Resistance (year 2019 - 2021)

Figure 3: Nestle’s Trendline, Support and Resistance from 2019 - 2021

The global commercial landscape had a difficult year in 2019, with overall economic
activity being dragged down by declining demand and currency changes. Nonetheless,
sustained private spending and solid labour market conditions aided Malaysia's domestic
economy. Beyond the near term, the rush to adopt Industry 4.0 and new technology
persisted, coupled with a rising need for answers to current environmental challenges.
Nestlé Malaysia was able to capitalise on domestic demand possibilities during the year by
engaging in successful sales and marketing efforts, as well as modifying their portfolio to
shifting customer demands indicative of changing lifestyles and consumption behaviours.

COVID-19 containment measures implemented during the MCO in 2020 had an

impact on mobility channels such as convenience stores and gas stations, as well as
confectionery product sales during this time period. Despite the unusual circumstances, they
were able to drive the business by concentrating on the fundamentals and changing their
brand messages to remain relevant and appeal to the hearts of customers in the midst of a
worldwide pandemic, creating opportunities from obstacles. They worked on creating
best-in-class execution in crucial areas, such as availability, visibility, accessibility, and
freshness, with the objective of restoring their basics and ensuring only the highest quality
items continue to be given to consumers. From portfolio management through in-store
execution, this was implemented at all levels. Furthermore, Nestle Berhad's net profit for the
third quarter ended September 30, 2020 (3Q20) fell 13.8% year on year (YoY) to RM128.39
million from RM148.99 million due to increasing operational expenditures and the

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pandemic's impact on hotels and restaurants across the country. The group's main food and
beverage (F&B) business climbed 2.2% in the quarter, to RM1.39 billion from RM1.4 billion
the previous year, led by in-home consumption and a strong rebound in exports. Nestlé also
mentioned that its hotel, restaurant, and catering channels remained lower than the previous
year's baseline. Nonetheless, it gained traction gradually after the lifting of operating limits
under the Recovery Movement Control Order (RMCO) began in mid-June. The damage was
reduced, however, by the group's core F&B division, which had a 1.1% gain in revenues
from January to September, thanks to good sales execution and successful marketing
initiatives. Nestlé also declared a second interim dividend of 70 sen per share, totaling
RM164.15 million, reaffirming the company's desire and confidence in delivering a healthy
payout for the whole year. While obstacles are anticipated to persist in the short term, the
group is optimistic about the long term and will continue to work hard every day to earn
Malaysians' faith and trust.

Despite remaining in a downtrend line in 2021, Nestle reported an improved

performance for the third quarter ended 30 September 2021, aided by sustained demand in
its core F&B sector as well as exports. Throughout Q3, the Group prioritised employee and
business partner safety while ensuring supply continuity despite COVID-19 operating
constraints.Turnover climbed by 3.6% to RM1.44 billion in the quarter, up from RM1.39
billion in the previous year's equivalent period. This was accomplished as a result of robust
sales growth in both domestic and international markets, which increased by 3.4% and
4.5%, respectively, driven by the Group's F&B division, which increased by 5.5% in Q3 2021.
This was despite the EMCO limits imposed in Q3 2021, which had a negative impact on
Nestlé Professional's OOH business. During Q3, NESCAFÉ Ready-To-Drink Limited Editions
(Gula Melaka, Pandan, and Ros Bandung), NESCAFÉ Ice Caffé Latte, KIT KAT Chunky
Raisin & Cookie, and NESTLÉ Onde Onde Ice Cream were presented. The Group has
expedited the growth of their plant-based offering under HARVEST GOURMET, as well as
the Dairy Free MILO and NESCAFÉ beverages, while the statewide rollout of LIVELY Tea
has gained traction. In the third quarter of 2021, profit before tax and profit after tax climbed
to RM207.6 million and RM148.0 million, respectively. This was mostly attributable to higher
top-line growth and reduced marketing expenditures, as marketing efforts were restricted
owing to EMCO limits in force during Q3 2021, as opposed to Q3 2020, when restrictions
were removed during the Recovery MCO. Higher commodity prices and COVID-19-related
expenses remained significant in Q3 2021, reflecting the cost of the Group's ongoing
COVID-19 antigen screening programme, the provision of personal protective equipment for
employees, and other COVID-19 safety measures to ensure infection prevention and
containment on-site.

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5.5 Indicators

5.5.1 Simple Moving Average

Simple Moving Average (SMA) is the most commonly used type of moving average.
It is also known as arithmetic moving average. An SMA is constructed by adding a set of
data and then dividing by the number of observations in the period being examined. This is
often interpreted as a signal that the market is quite strong. A trader might consider buying
when the shorter-term 50-day SMA crosses above the 200-day SMA. Contrarily, a trader
might consider selling when the 50-day SMA crosses below the 200-day SMA.

5.5.2 MACD

The Moving Average Convergence/Divergence indicator is a momentum oscillator

primarily used to trade trends. Although it is an oscillator, it is not typically used to identify
overbought or oversold conditions. It appears on the chart as two lines which oscillate
without boundaries. A crossover occurs when the signal and MACD line cross each other.
The MACD generates a bullish signal when it moves above its own nine-day EMA and sends
a sell signal (bearish) when it moves below its nine-day EMA.

5.5.3 Relative Strength Index

The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum

oscillator that measures the speed and change of price movements. The RSI oscillates
between zero and 100. Traditionally the RSI is considered overbought when above 70 and
oversold when below 30. Low RSI levels, below 30, generate buy signals and indicate an
oversold or undervalued condition. High RSI levels, above 70, generate sell signals and
suggest that a security is overbought or overvalued. A reading of 50 denotes a neutral level
or balance between bullish and bearish positions.

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5.5.4 William %R

Developed by Larry Williams, Williams %R is a momentum indicator that is the

inverse of the Fast Stochastic Oscillator. Readings from 0 to -20 are considered overbought.
Readings from -80 to -100 are considered oversold. Williams %R reflects the level of the
close relative to the highest high for the look-back period.It is an important buy/sell
opportunity when ROC and the 0 line cross. It is a buy signal when ROC crosses the 0 line
from below; conversely, when ROC crosses the 0 line from above, it is a sell signal.

5.5.5 Stochastic Oscillator

A stochastic oscillator is a momentum indicator comparing a particular closing price

of a security to a range of its prices over a certain period of time. The sensitivity of the
oscillator to market movements is reducible by adjusting that time period or by taking a
moving average of the result. As with moving averages, when the two stochastic lines (%K
and %D) cross, a signal is generated. If the white %K line crosses below the red %D line, a
possible sell signal is generated. If the red %D line crosses below the white %K line, a
possible buy signal is generated.

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5.6 Market Timing Indicator
5.6.1 Short Term (31 days) – Dec 2021

Figure 4: Short term chart of Nestle

Based on the indicators above, it shows the buy, sell or hold signal for Nestle for a
short term period which is in December 2021. It is observed that the movement of the price
in December 2021 has all indicators, which are SMA, MACD, RSI, William %R and
Stochastic showing a buy and sell signal which means there are an abundance of
opportunities for short term traders to enter or exit for Nestle in the short term period. Out of
the five indicators, MACD, RSI, William %R and Stochastic are seen to be more sensitive
and able to indicate an earlier buy or sell signal which gives an advantage which enables
traders to join before the price rally or exit before the price drops.

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 Indicator Date Signal Rules
SMA 1. 1 Dec 2021 Buy Buy signal: A closing price moving above
the moving average

Or

If Sell signal: A closing price moving below

2. 8 Dec 2021 Sell the moving average
MACD 3. 23 Dec 2021 Buy Buy signal: The MACD is above the zero
line

Or
4. 7 Dec 2021 Sell / Sell signal : The MACD is above the zero
Hold line

RSI 5. 17 Dec 2021 Buy Buy signal: The closing price is above 30

Or

If Sell signal : The closing price is below

6. 31 Dec 2021 Sell / 70
Hold
William % R 7. 10 Dec 2021 Buy Buy signal: The indicator r is below the
oversold line (-80) and then rises to cross
over the -80 line

Or

If Sell signal : The indicator is above the

8. 29 Dec 2021 Sell overbought line (-20) and then falls below
the -20 line.
Stochastic 9. 17 Dec 2021 Buy Buy signal: The indicator has been below
20%

Or
10. 7 Dec 2021 Sell /
Hold Sell signal : The indicator has been above
80%

16
5.6.2 Intermediate (60 days) (Nov – Dec 2021)

Figure 5: Intermediate term chart of Nestle

Based on the indicators above, it shows the buy, sell or hold signal for Nestle for an
intermediate term period which started from November 2021 to December 2021. It is
observed that the movement of the price in December 2021 has all indicators for MACD,
RSI, and Stochastic showing a buy and sell signal which means there are open chances for
traders to make an entrance or leave the stock for Nestle in the middle of the trading period.
However, out of the five indicators SMA and William %R are seen to indicate a prior buy cue
which may help traders to join before the price significantly joins an uptrend or exit before
the price indicates a major downfall. However, the traders may stay alert on the movement of
the stock activity if the entrance is made in the middle of the time period because a slight
downturn may affect the return of the bought stock and the traders may gain less expected
profit and high chance of losses.

17
 Indicator Date Signal Rules
SMA 11. 1 Nov 2021 Sell Buy signal: A closing price moving
above the moving average

Or
12. 25 Nov 2021 Buy
If Sell signal : A closing price moving
below the moving average
MACD 13. 24 Nov 2021 Buy Buy signal: The MACD is above the
zero line

Or
14. 7 Dec 2021
Sell Sell signal : The MACD line is above
the zero line
RSI 15. 17 Dec 2021 Buy Buy signal: The closing price is above
30

Or
16. 30 Dec 2021 Sell
If Sell signal : The closing price is
below 70
William % R 17. 15 Nov 2021 Buy Buy signal: The indicator r is below the
oversold line (-80) and then rises to
cross over the -80 line

18. 25 Nov 2021 Or

If Sell signal : The indicator is above

the overbought line (-20) and then falls
Sell below the -20 line.
Stochastic 19. 17 Nov 2021 Buy Buy signal: The indicator has been
below 20%

Or

20. 30 Nov 2021 Sell / Hold Sell signal : The indicator has been
above 80%

18
5.6.3 Long Term (90 days) (we take from Oct – Dec 2021)

Figure 6: Long term chart of Nestle

Based on the indicators above, it shows the buy, sell or hold signal for Nestle for a
long term period which started from October 2021 until December 2021. It is observed that
the five indicators that had been used which are SMA, MACD, RSI, William % R and
Stochastic had shown a promising movement for future and existing investors to make profit
by entering or exiting the market at the best time based on the chosen indicators in the
fundamental analysis. Market timing rules that use classic technical analysis benefit
investments and other long-term positions by finding the best prices and times to take
exposure in order to book profits. In addition, these timeless concepts can be utilized to
protect active long term investments by raising red flags when underlying market conditions
change significantly.

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 Indicator Date Signal Rules
SMA 21. 8 Oct 2021 Buy Buy signal: A closing price moving
above the moving average

Or
22. 18 Oct 2021 Sell
If Sell signal : A closing price moving
below the moving average
MACD 23. 11 Oct 2021 Buy Buy signal: The MACD is above the
zero line

Or

24. 18 Oct 2021 Sell / Hold Sell signal : The MACD line is above the
zero line
RSI 25. 5 Oct 2021 Buy Buy signal: The closing price is above
30

Or

26. 30 Dec 2021 Sell If Sell signal : The closing price is below
70
William % R 27. 16 Nov 2021 Buy Buy signal: The indicator r is below the
oversold line (-80) and then rises to
cross over the -80 line
Or
If Sell signal : The indicator is above the
28. 20 Oct 2021 overbought line (-20) and then falls
Sell below the -20 line.
Stochastic 29. 5 Oct 2021 Buy Buy signal: If the indicator has been
below 20%

Or

30. 12 Oct 2021 Sell / Hold Sell signal: If the indicator has been
above 80%

20
5.7 Conclusion and Recommendation

Indicator Existing Investor Future Investor

Moving Average Hold / Buy Buy
MACD Hold / Buy Buy
RSI Hold / Buy Buy
William % R Hold / Buy Buy
Stochastic Hold / Buy Buy

We may conclude from this that Nestle has produced a strong signal for both
existing and prospective investors to hold and purchase the company stocks.
Through our analysis, Moving Average, MACD, RSI, William% R, and Stochastic all
produce the same conclusion, indicating a favourable rationale for present and
prospective investors to buy the stock and may hold the stock whenever the
movement of the stock line seems to indicate slow activity or less expectant return
and portray the hold stock as safety stock which may help to reduce heat of losses
from the bought stock .

According to our technical analysis, Nestle's stock made a positive rise in the
market, moving to an uptrend line after taking a significant damage as well as KLCI
index which have bounce towards uptrend line after suffering a massive downfall
during the Covid-19 outbreak occurred, causing a market slump not just in our
country but throughout the world which subsequently affected the supply and
demand of Nestle’s product after the government announce the movement restriction
order. However, we believe that there is still the possibility that the stock will go
bearish for present investors; but, the safest alternative for current investors is to hold
to purchase the stock until the movement of the stock indicates a bullish trendline.
Although buying during a bearish trend is generally an effective strategy. Investing in
stocks when they are on sale is a long-term winning strategy. Even if you need to
accept some losses incurred, investing in the stock market when they have already
begun to fall can result in nice returns in the past, but nothing works 100% of the
time. When an investor buys stocks while they are down significantly, their forward
gains are usually favourable. However, investors must be reminded from time to time
that risk can result in years of poor stock returns.

Furthermore, based on the stock's pattern, the best suggestion for the future
investor is to purchase the stock. Based on Nestle’s stock chart, the stock has
already reached its new 52-week high, indicating a strong signal for prospective
investors to buy. When a stock makes a new 52-week high, it usually continues to
rise until it reaches its previous resistance. The future investors may adhere to the

21
principle of a 52-week high in order to determine the exit or entry peak of a stock
purchase, the tier of resistance offered to the security, and so on. It provides an
opportunity for the investor to make an informed investment decision based on
satisfactory indications about both the path of the market and, in particular, the
stance of the stock. Those certain oscillations also imply to the investor that perhaps
the stock has peaked and is unlikely to rise higher in the coming years. This suggests
that reaching a 52-week high daily chart and afterwards going to close to negative
within the same day implies that the price might not even rise any time soon. As is
commonly known, a 52-week high indicates that there is indeed a high likelihood of
major gains ahead. It frequently persuades investors to purchase more of the
company's securities. As dangerous as this may appear, the results could be
extremely rewarding.

22
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