Poh Kong Holdings Berhad (Trading Buy)

• POHKONG manufactures and retails jewellery in gold and gemstones. Thus, the share price closely tracks gold price movements.

• Technically speaking, after GOLD took a beating throughout June, driven by a surprisingly hawkish Fed, GOLD recently rebounded off the USD$1,760 support level and broke above the 100 day-SMA, setting the ground for another rally.

• Similarly, after falling 32% from the peak of RM1.17 in May, POHKONG has rebounded off a support of RM0.79 at the turn of the month. With yesterday’s 5% rise in share price, the share price closed above both the 50 day-SMA and the 200 day-SMA, signalling an underlying bullish bias for the share price.

• With the gold price rally gaining momentum ahead of the Fed’s June-minutes (to be released on Wednesday), we believe the bullish momentum will spill-over onto POHKONG, potentially driving the share price higher.

• With the MACD showing signs of upward momentum, we believe the share price could potentially challenge our resistance levels of RM0.98 (R1; 13% upside potential) and RM1.05 (R2; 21% upside potential).

• We have pegged our stop loss at RM0.76 (12% downside risk).

Tomei Consolidated Berhad (Trading Buy)

• TOMEI designs, manufactures and retails jewellery, and refines gold and silver.

• Similar to POHKONG, TOMEI’s share price also closely tracks gold price movements.

• Technically speaking, after peaking at RM1.46 in early-June, TOMEI’s share price fell 37%, mirroring GOLD’s 8% drop in June.

• Yesterday, following GOLD’s convincing technical breakout above the 100 day-SMA, TOMEI closed 7% higher.

• Moving forward, with the Fed rate hike fears subsiding, given the above-consensus US unemployment rate and resurgence of new Covid variants in the US, GOLD may continue to gain upward momentum, which we think may spill over onto TOMEI’s share price.

• With the MACD and stochastic indicators showing signs of waning downward momentum and strengthening upward momentum, respectively, an anticipated upward movement in the share price could potentially challenge our resistance levels of RM1.15 (R1; 14% upside potential) and RM1.24 (R2; 23% upside potential).

• We have pegged our stop loss at RM0.88 (13% downside risk).

Source: Kenanga Research - 7 Jul 2021