• Sunway Construction Group Berhad (SUNCON) closed at RM4.51 last Friday, posting a gain of 1.12% as the stock continued its steady recovery from recent lows. The price movement reflects consolidation near a critical resistance zone, hinting at the possibility of a breakout should buying momentum persist. Notably, the convergence of the 5-, 13-, and 50-day SMAs within the RM4.38-RM4.42 range underscores the stock's pivotal position, with directional movement expected in the near term.
   
• From a technical perspective, the stochastic oscillator, currently at 44.26, is trending upward, signalling improving buying interest while remaining comfortably below overbought levels. The Tom Demark Pressure Ratio (TDPR) at 49.32 further supports the outlook, as reduced selling pressure creates a conducive environment for an upward move. Meanwhile, the RSI has inched higher to 48.44, nearing the neutral 50-mark, suggesting recovering momentum that aligns with a bullish bias. A bullish divergence in the RSI further bolsters the optimism for a breakout, as the indicator strengthens despite previous price consolidation.
   
• Immediate resistance is identified at RM4.58. A decisive breakout above this level could lead to further gains, with the next target at RM4.74, a significant resistance zone near prior highs. On the downside, immediate support lies at RM4.50, aligned with the 23.6% Fibonacci retracement level, followed by RM4.42, where the 5- and 13-day SMAs converge. An additional support level is seen at RM4.38, providing a buffer against potential pullbacks.
   
• For traders looking to take advantage of this setup, accumulating SUNCON between RM4.45 and RM4.51 may offer an optimal entry point. A take-profit target at RM4.74 yields an upside potential of approximately 5.1%, while a stop-loss at RM4.34 limits downside risk to 3.8%. This strategy presents a favourable risk-reward profile for those aiming to capitalise on the potential bullish continuation in SUNCON’s price trajectory.

Source: Kenanga Research - 18 Nov 2024