VSTECS BERHAD (Technical Buy)

• VSTECS Berhad (VSTECS) closed at RM3.23 yesterday, posting a solid gain of 3.86%. The stock appears to be recovering from recent lows and is now testing the 38.2% Fibonacci retracement level at RM3.28, indicating that further upside may be possible if the positive momentum persists.
• From a technical standpoint, the stochastic oscillator has advanced to 57.82, reflecting increasing buying interest. The Tom Demark Pressure Ratio (TDRP) stands at 53.91, pointing to easing selling pressure. Additionally, the RSI is trending upwards at 47.75, nearing the neutral 50-mark, suggesting that the stock has potential for further gains. Notably, the chart reveals a bullish divergence on the RSI, where the indicator has shown an upward trend despite recent lower price levels, hinting at a possible bullish reversal.
• Key resistance is at RM3.28, in alignment with the 38.2% Fibonacci retracement level, with further resistance at RM3.64 and RM3.75, coinciding with the 23.6% Fibonacci level. On the downside, immediate support lies at RM3.07, near the 50-day SMA, followed by stronger support at RM2.90 (aligned with the 50% Fibonacci retracement) and RM2.86 (its 200-day SMA), both of which offer solid protection against potential pullbacks.
• For traders aiming to capitalize on the recovery, accumulating the stock between RM3.20 and RM3.23 may provide a strategic entry point. A take-profit target at RM3.69 offers an upside potential of approximately 14.2%, while placing a stop-loss at RM2.85 limits the downside risk to 11.7%. This setup presents a favourable risk-reward profile for traders anticipating further strength in VSTECS's price action.

Source: Kenanga Research - 23 Oct 2024