LGMS BERHAD (Technical Buy)

• LGMS Berhad (LGMS) closed at RM1.35, recording a slight decline of 2.17% as the stock continued its consolidation phase around a significant support level. The price action indicates a potential base formation at this level, with a chance of reversal if buying pressure strengthens. The alignment of key moving averages-such as the 13-day SMA at RM1.36 and the 50-day SMA at RM1.34-suggests a possible pivot point, where a decisive move could lead to a breakout or further consolidation.
• From a technical perspective, the stochastic oscillator stands at 31.37, rising from oversold territory, which could attract buyers if the uptrend sustains. The Tom Demark Pressure Ratio (TDPR) is at 63.33, reflecting decreased selling pressure, creating an environment conducive for a possible rebound. Additionally, the RSI has ticked up slightly to 49.51, nearing the neutral 50-mark, which supports the potential for further upward momentum if the level is breached. The presence of a bullish divergence in the RSI further reinforces optimism for a trend reversal, with the indicator moving higher while price stabilises.
• Immediate resistance lies at RM1.43, corresponding to the 38.2% Fibonacci retracement level. A breakout above this level could propel the stock towards RM1.57, aligning with the 23.6% Fibonacci retracement level and recent price highs. On the downside, support is seen at RM1.31, providing a buffer against potential pullbacks, with additional support at RM1.27 or its 200-day SMA for extra stability.
• For traders looking to take advantage of a potential rebound, accumulating around RM1.32-RM1.35 could provide a strategic entry point. A take-profit target at RM1.43 offers an upside potential of approximately 6.0%, while setting a stop-loss at RM1.27 limits downside risk to around 6.0%. This setup presents a balanced risk-reward profile, suitable for short-term traders anticipating a possible bullish shift in LGMS's price action.

Source: Kenanga Research - 15 Nov 2024