KUALA LUMPUR: RHB Research Institute said it expects fresh buying momentum to fuel a new rally in KUB Malaysia's share price and it may advance to 85 sen on the short term and 91 sen in the medium term.
It said on Thursday, June 16 that KUB's share price, since hitting a year high of 96 sen in January, saw its share price correcting to a low of 60.5 sen before staging a new rally to a high of 87.5 sen on April 7.
RHB Research said failing to sustain above the 85 sen resistance, the stock subsequently corrected to a low of 68 sen on May 30 before consolidating within the range of 68 sen to 72 sen over the next few weeks.
On Wednesday, the stock gapped up to open at 72.5 sen (from its previous close of 69.5 sen) and rise to a high of 78 sen before closing marginally lower at 77.5 sen to form a long-white candlestick. Note that there was a surge in trading volume of 14.4 million shares on Wednesday.
'Noticeably, the sharp spike in KUB's share price yesterday saw the RSI (60.924 pts) and Stochastic tip upwards to indicate strong buying momentum in the immediate term.
'While both the MACD line and signal line remained in the negative region, the MACD line cut above the signal line to signal a change to the stock's immediate outlook to positive from negative previously,' it said.
RHB Research said further confirmation to the recovery of the stock's bullish momentum is seen by the decreasing divergence of the 10-day SMA (RM0.7075) below the 40-day SMA (RM0.7446).
The research house said technically, the stock's gap-up opening and formation of a long-white candlestick yesterday (together with the positive indications by the RSI and Stochastic) indicates strong bullish momentum in the immediate term.
'In our view, KUB's share price would continue its uptrend towards its immediate resistance of 85 sen in the short term and 91 sen in the medium term (given positive news flow and expectations of stronger buying interest),' it said.
Nevertheless, it highlighted that the stock would first need to remove its immediate resistance of 78 sen to turn its immediate outlook positive.
'Hence, we advise investors to buy on breakout at above 78 sen to ride on a potential rally to its immediate resistance of 85 sen in the short term and 91 sen in the medium term. Note that, a further breaching of the 91 sen resistance would lead to a retest of its year-high of 96 sen.
'Conservative investors in anticipation of a pullback may, however, choose to buy towards the support of 72.5 sen for a better bargain,' it said.
RHB Research said although it expects good support at 72.5 sen, breaching this level would turn its immediate outlook neutral and lead to its share price falling to its next support of 68 sen. Note that a further breaching of the 68 sen level would turn the overall outlook negative and lead to its share price falling to its next support of 65 sen in the short term and 60.5 sen in the medium term. Hence, investors should cut loss if the price breaches 72.5 sen while medium term investors may choose to cut loss at below 68 sen.
'Overall, we still see a good risk to reward ratio for investors with an entry price of 79 sen given that the upside to its immediate resistance of 85 sen and 91 sen is 6 sen and 12 sen respectively while its downside to its cut loss level of 72.5 sen is at 6.5 sen,' it said.
It said on Thursday, June 16 that KUB's share price, since hitting a year high of 96 sen in January, saw its share price correcting to a low of 60.5 sen before staging a new rally to a high of 87.5 sen on April 7.
RHB Research said failing to sustain above the 85 sen resistance, the stock subsequently corrected to a low of 68 sen on May 30 before consolidating within the range of 68 sen to 72 sen over the next few weeks.
On Wednesday, the stock gapped up to open at 72.5 sen (from its previous close of 69.5 sen) and rise to a high of 78 sen before closing marginally lower at 77.5 sen to form a long-white candlestick. Note that there was a surge in trading volume of 14.4 million shares on Wednesday.
'Noticeably, the sharp spike in KUB's share price yesterday saw the RSI (60.924 pts) and Stochastic tip upwards to indicate strong buying momentum in the immediate term.
'While both the MACD line and signal line remained in the negative region, the MACD line cut above the signal line to signal a change to the stock's immediate outlook to positive from negative previously,' it said.
RHB Research said further confirmation to the recovery of the stock's bullish momentum is seen by the decreasing divergence of the 10-day SMA (RM0.7075) below the 40-day SMA (RM0.7446).
The research house said technically, the stock's gap-up opening and formation of a long-white candlestick yesterday (together with the positive indications by the RSI and Stochastic) indicates strong bullish momentum in the immediate term.
'In our view, KUB's share price would continue its uptrend towards its immediate resistance of 85 sen in the short term and 91 sen in the medium term (given positive news flow and expectations of stronger buying interest),' it said.
Nevertheless, it highlighted that the stock would first need to remove its immediate resistance of 78 sen to turn its immediate outlook positive.
'Hence, we advise investors to buy on breakout at above 78 sen to ride on a potential rally to its immediate resistance of 85 sen in the short term and 91 sen in the medium term. Note that, a further breaching of the 91 sen resistance would lead to a retest of its year-high of 96 sen.
'Conservative investors in anticipation of a pullback may, however, choose to buy towards the support of 72.5 sen for a better bargain,' it said.
RHB Research said although it expects good support at 72.5 sen, breaching this level would turn its immediate outlook neutral and lead to its share price falling to its next support of 68 sen. Note that a further breaching of the 68 sen level would turn the overall outlook negative and lead to its share price falling to its next support of 65 sen in the short term and 60.5 sen in the medium term. Hence, investors should cut loss if the price breaches 72.5 sen while medium term investors may choose to cut loss at below 68 sen.
'Overall, we still see a good risk to reward ratio for investors with an entry price of 79 sen given that the upside to its immediate resistance of 85 sen and 91 sen is 6 sen and 12 sen respectively while its downside to its cut loss level of 72.5 sen is at 6.5 sen,' it said.
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