KAREX BERHAD (Technical Buy)

• After a week-long consolidation around its 13-day Simple Moving Average (SMA), the stock has shifted into an upward trend, closing above both its 5-day and 13-day SMA lines at RM0.600 as of yesterday. This bullish momentum is amplified by an uptick in trading volume. Additionally, the short-term 5-day SMA has crossed above the longer-term 13-day SMA, further reinforcing the stock's positive short-term outlook.

• From a technical perspective, the stochastic oscillator is currently ascending and has surpassed the pivotal 50-level, signaling bullish momentum. Simultaneously, the Tom DeMark Pressure Ratio (TDRP) has shown signs of a rebound, suggesting renewed buying interest may be on the horizon. The presence of a 'banker chip' in MCDX further strengthens the stock's positive technical outlook.

• A definitive breach above the key resistance level of RM0.63 could pave the way for the stock to target RM0.645, aligning with its 200-day SMA. On the other hand, a marked decline below the 5-day SMA of RM0.58 would likely trigger a new bearish trend, with immediate support established at RM0.555.

• We recommend entering a position in the stock at RM0.600, with the aim of taking partial profits at RM0.63 and subsequently at RM0.645. This approach yields an estimated upside potential of roughly 6.3%. For risk management, we recommend setting a stop-loss at RM0.570, which equates to a downside risk of approximately 5.0%.

Source: Kenanga Research - 17 Oct 2023