PETRONAS CHEMICALS GROUP BERHAD (Technical Buy)

• Petronas Chemicals Group Berhad (PCHEM) closed at RM4.92 last Friday, advancing by 1.86%, as the stock extended its recovery from recent lows. The price action highlights sustained buying momentum, with the stock trading above key support levels and showing signs of continued upward movement. The break above its immediate 5-day SMA at RM4.75 underscores improving sentiment and positions the stock for further gains in the near term. In addition, the weekly technical chart is also improving, with key stochastic and RSI indicators showing an upward trend from its oversold territory, further reinforce its bullish setup.
• From a technical perspective, the stochastic oscillator stands at 14.47, rebounding from oversold territory and signalling strengthening momentum. The Tom Demark Pressure Ratio (TDPR) at 26.38 reflects declining selling pressure, creating a favourable environment for further recovery. Additionally, the RSI has improved to 26.23, showing early signs of a turnaround while maintaining a bullish divergence with price action. This recovery momentum is supported by the stock's breakout above immediate resistance levels, pointing to a potential continuation of the upward trend.
• Immediate resistance is located at RM5.00, aligning with the 13-day SMA. A breakout above this level could propel the stock toward RM5.06 and RM5.37, which corresponds to its 50-day SMA. On the downside, immediate support is observed at RM4.75, with additional support at RM4.50, providing a buffer against pullbacks.
• For traders looking to capitalise on the recovery, accumulating the stock between RM4.85-RM4.92 may offer a favourable entry point. Setting a take-profit target at RM5.36 provides an upside potential of approximately 8.9%, while a stop-loss at RM4.49 limits downside risk to around 8.7%. This setup presents a balanced risk-reward profile, making it suitable for traders aiming to leverage PCHEM's recovery momentum and improving technical indicators.

Source: Kenanga Research - 25 Nov 2024