Technical Highlights

The stock underwent a significant correction as it entered a consolidation phase after reaching its 52-week high. However, recently, the stock regained momentum and slowly climbed upward from its trough. The stock also started to trade in the pattern of higher high and higher low, underpinned by growing buying interest. Yesterday's surge in volume (1.4x the 90-day average) pushed the stock to break out of an inverse head-and-shoulders pattern. This volume-backed breakout signals a potential shift into an upward trend, with growing buying interest supporting the stock’s positive momentum.

Momentum indicators also align well with the pattern breakout. The RSI is accelerating towards the overbought territory, signalling persistent buying pressure. Likewise, the recent exhibition of a golden cross in the MACD technical indicator ascertains the positive upward momentum in the stock.

A range between RM0.700 and RM0.715 would be an ideal entry point. With the breakout of the inverse head-and-shoulder pattern, accompanied by increasing momentum, the stock could gain strength to challenge its initial resistance at RM0.820 (calculated from the pattern's high and low). The next resistance level to challenge would be at RM0.845 level if the stock successfully breaches above its first resistance level. However, a drop below the RM0.685 support level could signal a return to the consolidation phase.

Entry – RM0.700 – RM0.715

Stop Loss – RM0.635

Target Price – RM0.820 – RM0.845

Source: Mercury Securities Research - 15 Oct 2024