Samsung, Technology Shares to Lead Asia: Technical Analysis

Dec. 22 (Bloomberg) -- Technology shares including Samsung Electronics Co. and Hynix Semiconductor Inc. may lead an advance in Asian markets next year after breaking out of a two-year “basing pattern,” CLSA Asia-Pacific Markets said.

The MSCI Asia excluding Japan Information Technology Index relative to the broader regional gauge has overcome the resistance formed by the October 2008 peak and the high this year, CLSA analysts Laurence Balanco and Tiara Fontanilla said in a report dated yesterday. This follows a break above its 40- week weighted moving average in July, the analysts also said.

“A break above the downtrend from the 2000 peak would appear structural to us,” the analysts wrote. “As such, the IT sector is well placed to be an area of leadership in the region for years to come.”

The MSCI regional index of technology stocks has rallied 42 percent in the past six months, the most among 10 industry groups on the broader MSCI Asia excluding Japan Index, which climbed 23 percent.

Going into the first quarter of 2010, investors should “overweight” shares of Samsung Electronics and Hynix Semiconductor, the world’s two largest computer-memory chipmakers, according to the CLSA report.

Samsung Electronics, whose shares have rallied 72 percent this year, may find its next resistance at 864,433 won, where the fifth wave would be approximately 62 percent of the first wave, the analysts wrote. The resistance level is 12 percent higher than yesterday’s close.

A subsequent target for the stock would be 979,749 won, where the final wave would equal the first leg in percentage terms, the analysts also said.

Elliott Wave Theory, developed by accountant Ralph Nelson Elliott during the Great Depression, postulates that market swings, or waves, follow a predictable, five-stage structure of three steps forward, two steps back.

Meanwhile, Hynix has broken above a “major cluster zone of resistance” at around 21,200 won formed by the peaks of August 2007, June 2008 and September 2009, CLSA said. The brokerage predicted that the stock’s next resistance will be at 26,144 won.