PHARMANIAGA BHD (Technical Buy)

• Pharmaniaga Berhad (PHARMA) settled at RM0.385, gaining 1.32% yesterday. The stock has been consolidating near its 200-day SMA for the past eight trading days, indicating a momentum build-up for a potential breakout. Additionally, the formation of a hammer candlestick pattern suggests easing downward pressure, setting the stage for a possible reversal.
• From a technical perspective, the stochastic oscillator is at 38.43, signalling early signs of upward momentum as the stock recovers from oversold conditions. The Tom Demark Pressure Ratio (TDPR) has risen to 63.45, reflecting easing selling pressure. The Relative Strength Index (RSI) is at 50.45, hovering near neutral, with the potential for a bullish breakout if buying pressure intensifies.
• Looking forward, a decisive breakout above the immediate resistance at RM0.387 (50-day SMA) could push the stock towards the next resistance levels at RM0.400 and its recent high of RM0.410. Conversely, a dip below the lower boundary of the recent consolidation range at RM0.370 may initiate a renewed downtrend.
• We recommend making an entry at RM0.385, with a take-profit target of RM0.405 for a potential upside of around 5.2%. To mitigate risk, a stop-loss should be placed at RM0.365, which would cap potential losses at approximately 5.2%.

Source: Kenanga Research - 23 Oct 2024