After MSC experienced heavy selling pressure yesterday, we want to highlight that the stock is now approaching a critical support floor at the RM3.99 level. As a violation of this level could trigger a major breakdown, we will be eyeing the RM3.75 level as the initial downside target, followed by the RM3.49 level. In addition, a 'Head and Shoulder' formation will also be completed should the RM3.99 level be violated.
MSC had previously found meaningful support at the critical RM3.99 horizontal floor in Nov and Dec 2011, and March this year. The significance of this support level is obvious as the subsequent rebounds after holding at the RM3.99 level were impressive.
From the above daily chart, we can see that the stock has been in retracement mode after it failed to close down the RM4.30-RM4.58 downside gap created in March this year. It is now retracing towards the RM3.99 critical level and we would like to emphasize that if this level is violated, a major breakdown will be triggered. In addition, the violation of the RM3.99 level would also complete the 'Head and Shoulder' formation which began since Nov 2011.
We advise traders to sell MSC shares at below the RM3.99 level. The initial downside target would be the RM3.75 support level. The RM3.49 level, which is a much stronger support, would be the next downside target. To the upside, look for immediate resistance at the RM4.16-RM4.22 area, followed by the RM4.37 level.