End ofConsolidation Phase
Prior to the 14% gainmade yesterday, Flonic was consolidating in the range of RM0.12-RM0.15. Yesterday's massive price action has ended the stock's consolidation and triggered abreakout. Traders are advised to accumulate its shares now or at above the RM0.15 level. Another strongup-wave is expected to emerge should the100-day MAV line be violated. We are eyeing RM0.20 as the immediate upsidetarget, followed by the RM0.235 level. Consider cutting losses should the shareprice fall below the RM0.15 level.
After the strong rebound on 20 Jan 2012, Flonic had beenconsolidating the gains between the RM0.12 and RM0.15 levels, until yesterday'sprice action that ended the consolidation phase by cracking above the RM0.15level. The violation appears to be genuine, judging from the strong momentumand accompanying high volume. The question now is whether Flonic could violatethe essential 100-day MAV line. As thestock has just violated the consolidation phase in great fashion and the100-day MAV line is situated right above the price now, we think it is likelyfor the moving average line to beviolated too. Should the 100-day MAVline be violated, another round of strong upward momentum is expected toemerge. Importance of the moving average line to the stock in 2011 ishighlighted with circles in the above chart.
Hence, traders are advised to accumulate its shares now orat above the RM0.15 level in anticipation of breakout gains. We are eyeing theRM0.20 psychological mark as the immediate upside target. Nevertheless, astrong resistance is located at RM0.235 and we do not rule out the possibilitythat the anticipated breakout momentum would carry its share price to this level.In addition, with Flonic's daily RSI closing at the 63.7-pt level yesterday, itis still far from the overbought territory and the peak of 88 pts recorded lastyear.
We peg the cut-loss level at below the RM0.15 level which is also the immediatestrong support for the stock. The next strongsupport is seen at the RM0.115/RM0.12 level. To the upside, the 100-day MAVline which now lies at the RM0.17 level represents the immediate resistance.Our upside targets of RM0.20 and RM0.235 are the next resistance levels.