EASTERN & ORIENTAL BERHAD (Technical Buy)

• After momentarily peaking at RM0.730 in late September, E&O Resources strategically retraced by 25% and closing at RM0.545. The presence of a 'Bullish Harami' candlestick pattern suggests a potential change in the stock's direction.

• From a technical perspective, both the Stochastic Oscillator and the Tom Demark Pressure Ratio (TDRP) are either entering or closely approaching oversold conditions, displaying early signs of a bullish uptrend. This scenario suggests an imminent trend reversal and presents a short-term trading opportunity that investors should closely watch.

• In terms of price movements, a consistent close above the 5-day Simple Moving Average (SMA) of RM0.565 might lead to a rally towards RM0.585, aligning with its 13-day SMA. Alternatively, a decline below the immediate support level of RM0.515 could indicate a bearish trend.

• We recommend seizing this opportunity by initiating a position at the attractive market price of RM0.545, targeting a take-profit level of RM0.580. This strategy offers a promising upside potential of approximately 6.4%. To ensure a balanced approach, we suggest implementing a 1-to-1 risk-and-reward ratio and setting a stop-loss at RM0.510, corresponding to a potential downside of roughly 6.4%.

Source: Kenanga Research - 3 Nov 2023