RGB INTERNATIONAL BERHAD (Technical Buy)

• After hitting a record high of RM0.43 on August 24, RGB underwent a substantial correction, ultimately establishing a double bottom pattern at the RM0.275 mark. Since forming this second bottom on October 3, the stock has reversed course, closing above its 13-day Simple Moving Average (SMA) of RM0.305 as of yesterday. This positive momentum is further bolstered by a notable increase in trading volume. Concurrently, the 5-day SMA has initiated an upward trend and is nearing convergence with the 13-day SMA. Given these technical cues and the surge in trading volume, RGB is well-situated for potential future gains, particularly if the 5-day SMA overtakes the 13-day SMA.

• Technically speaking, the stochastic oscillator is on an upward trajectory and has crossed the critical 50-level mark. Concurrently, the Tom DeMark Pressure Ratio (TDRP) has displayed a minor downtrend after reaching the 50-level, indicating that buying and selling pressures are still in a state of equilibrium.

• A decisive break above the immediate resistance level at RM0.31 could set the stage for the stock to advance towards RM0.33 and potentially RM0.35. Conversely, a significant drop below the 5-day SMA would signal the onset of a new downward trend, with immediate support found at RM0.275.

• We recommend entering a position in the stock at RM0.305, targeting partial profit-taking at RM0.33 and subsequently at RM0.35. This strategy offers an estimated upside of approximately 11.5%. We also suggest implementing a stop-loss at RM0.275, corresponding to a downside risk of 9.8%.

Source: Kenanga Research - 17 Oct 2023