REDTONE DIGITAL BERHAD (Technical Buy)

• REDtone Digital Berhad (REDTONE) closed at RM1.01 yesterday, marking an impressive gain of 3.59%. The stock broke out from its recent consolidation, and coupled with rising volume, it signalled renewed bullish momentum. This breakout above key moving averages and resistance levels suggests that REDTONE may be poised for further upside in the near term.
• From a technical perspective, the stochastic oscillator is elevated at 85.10, reflecting strong buying interest, though it is approaching overbought territory. The Tom Demark Pressure Ratio (TDRP) is at 66.29, indicating easing selling pressure, which further supports the bullish sentiment. Additionally, the RSI is trending higher at 61.01, moving firmly above the neutral 50-mark, which suggests sustained momentum for further gains. Moreover, the weekly chart also exhibits similar bullish setups, reaffirming the positive sentiment and strengthening the case for continued upward movement.
• With the breakout confirmed, immediate resistance is at RM1.08, a prior swing high that could act as a short-term hurdle. If the stock sustains its upward trajectory, the next target will be RM1.14, followed by RM1.21. On the downside, key support levels are found at RM0.990, aligned with the 200-day SMA, followed by RM0.975, which served as a strong base during the recent consolidation.
• For traders looking to capitalise on this breakout, accumulating the stock between RM0.990 and RM1.00 offers attractive entry points. A take-profit target at RM1.06 provides an upside potential of approximately 6.0%, while setting a stop-loss at RM0.960 limits downside risk to around 4.0%. This setup offers a favourable risk-reward ratio for short-term traders seeking to ride the bullish momentum in REDTONE's price action.

Source: Kenanga Research - 24 Oct 2024