Summary. The Jakarta Composite Index (JCI) is most likely to remain flat in the 2,900-2,950 range in the lead-up to the inflation rate announcement. We also look forward to minor corrections that may appear over the next 1-2 days. We do not see a big threat from the inflation issue. Buy on weakness.

Inflation rate and market movements. Most Indonesian stocks did not make Analyst impressive gains yesterday. The market was flat on low volume. It is highly likely that the market is waiting for Indonesia’s inflation rate announcement on 1 July 10. As such, we expect the market to remain flat or to consolidate until that day.

Wave analysis of inflation rate. Based on historical data for 2009-10, the inflation rate moved in an impulsive wave downtrend rally until it hit the bottom in Dec 09, concluding as wave 5. We expect to see three wave corrections after the completion of wave 5. In fact, the inflation rate is making higher highs and higher lows, indicating a corrective rally or a new bull trend. We conclude that the inflation rate in Indonesia will tend to move stronger with a typical target rate of 5.7% (wave 3 or C) this year.

Negative correlation between JCI and inflation rate. We have found a negative correlation of 0.87 between JCI and Indonesia’s inflation rate between Jan 09 and Jun 10. Therefore, when the inflation rate rises, we expect a short- term correction in JCI. Buy on weakness.

The full moon impact on JCI. The full moon (26/6) impact remains strong. We will soon find support for blue chips in the wake of this event. Thus, traders should take advantage by buying blue chips when they are undergoing a correction.

Good short-term trading stocks. We see more opportunities in BUMI JK, ASII JK, BMRI JK, UNVR JK and INDF JK.

Summary: The IDX could move in an impulsive wave 3 of 5 with a potential target price of Rp3,020. It should not fall below 2,873, as is the typical characteristic of an impulsive wave 3. Buy on weakness.


Summary: Based on our observation, BMRI JK is moving in a potential broadening pattern. Currently, it is likely to be forming wave E. However, we believe Rp5,400 will act as a short-term support for short-term trading. Buy at Rp5,400 with protective stop loss at Rp5,200 and take profit target at Rp5,800. As an alternative trading plan, we could buy BMRI IJ when it breaks Rp6,100. This strategy assumes the continuation of the impulsive wave rally. Thus, Rp6,150 is our buying price with stop loss at Rp 5,800 and take profit target at Rp6,800.

Related Post: