DIALOG GROUP BERHAD (Technical Buy)

• Dialog Group Berhad (DIALOG) closed at RM1.99 yesterday, gaining 2.05%, as the stock attempts to recover from recent downtrends. The price action suggests a rebound off key support levels, with the stock trading near its lower range, signalling a potential reversal if buying interest sustains. The convergence of the 50-day SMA at RM2.12 and the 200-day SMA at RM2.28 indicates significant overhead resistance, while current levels provide a critical inflection point for the stock.
• From a technical standpoint, the stochastic oscillator is at 25.78, recovering from oversold territory and signalling early signs of a rebound. The Tom Demark Pressure Ratio (TDRP) at 30.22 reflects reduced selling pressure, creating an environment conducive to a potential recovery. Meanwhile, the RSI has edged up to 37.79, signalling improving momentum, although it remains below the neutral 50-mark.
• Immediate resistance lies at RM2.05, aligning with the 13-day SMA. A breakout above this level could lead to a further rally towards RM2.12, where the 50-day SMA and 50% Fibonacci retracement converge. A continuation of upward momentum may then test RM2.29, the 200-day SMA and 38.2% Fibonacci retracement level. On the downside, support is observed at RM1.91, with additional support at RM1.80, offering buffers against pullbacks.
• For traders aiming to capitalize on a potential recovery, entering the stock between RM1.95-RM1.99 could provide a strategic entry point. Setting a take-profit target at RM2.11 offers an upside potential of approximately 6.0%, while a stop-loss at RM1.89 limits downside risk to around 5.0%. This setup presents a balanced risk-reward profile, making it suitable for traders anticipating a rebound in DIALOG's price trajectory, contingent on sustained buying interest at current levels.

Source: Kenanga Research - 20 Nov 2024