Support at RM1.57
One of the heavily traded stocks last year, Eastern andOriental, is still garnering market interest. After setting a 4-year high lastmonth, it slipped into a correction but the stock's longer term uptrend since early 2009 is still intact. Aclose above RM1.60 yesterday may spark a continuation of this uptrend.
We featured Eastern and Oriental twice in our previousreports and on both occasions, the stock had moved favourably. After a3-month rally, the stock reached our target of RM1.78 and printed a 4-yearhigh. This reaffirmed the longer term uptrend that started in early 2009.
It then naturally went into a correction, now into its 5thweek, and has retraced by about 50% of the Nov 2011-Feb 2012 rally. This correctionis still considered healthy for the uptrend, based on Fibonacci analysis. Theshare price is also near the rising 50-day MAV line, which may prove supportive.The stock's inability to break below RM1.57 despite testing it twice has triggered buying, with the 'LongBlack' candle of 23 Feb failing to induce further selling.
Nonetheless, a bottom will only be confirmed if the stock closes above RM1.60, which was the highest since 7 Mar. This happenedyesterday on improved volume, which suggests renewed buying interest. A purchase can bemade above RM1.60, while a close below the Feb and Mar low of RM1.57 can beemployed as stop loss. The price target is RM2.15, a measured move basedon the June 2010 to Aug 2011 rally,which coincidently is the uncovered gapof Mar 2008. This is provided that the stock manages to violate the short termresistance levels at RM1.70 and RM1.85, the highs of March and Febrespectively.
However, look for the correction to continue should the RM1.57 stop loss be triggered. First support should come in at RM1.45,a measured move based on the Feb decline and a prior resistance in Nov 2011-Jan2012. Strong support remains at RM1.30, the low of Apr and Nov 2011, aviolation of which may signal the end of the 3-year rally.