AFTER setting a new record of RM2.11 on Aug 2, 2012, GUAN CHONG BHD (GCB, 5102) shares reversed on correction owing to apparent profit-taking.
It was a typical correction phase initially, but turned ugly later, as persistent liquidation pressure hurt sentiment, knocking down prices to a near five-year low of 72 sen on Aug 18 last year.
However, just when it looked defenceless and in great danger of breaking down from the 65 sen mark, which is the 76.4% Fibonacci retracement line of the previous massive rally, investors emerged unexpectedly to indulge in bargain hunting activity.
A fresh bout of buying momentum saw GCB shares recovering to a high of RM1.50 in intra-day session yesterday, the best level since May last year.
Based on the daily chart, GCB has carved out a steep uptrend and despite the broader market experiencing greater volatility, this stock stood tall amid continuous support from investors. The solid underlying tone implies there may be more scaling in the pipeline. The initial resistance is expected at the RM1.60 barrier, followed by the RM1.80.
A decisive breach of the upper hurdle of RM2 psychological mark would set the stage for a re-test of the historical peak of RM2.11, or open the doors for the bulls to explore the unknown territory. Elsewhere, the oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index were on the rise. It had issued a short-term buy at the neutral area on Thursday. Also on the upward trend, the 14-day relative strength index advanced from a reading of 51 on Monday to close the week at the 68 points level yesterday.
Though the moving average convergence/divergence histogram retained the sell signal, it had indicated a strong convergence pictogram. It may issue a buy call in the next couple of days, if prices could sustain the upward thrust. Technically, indicators are getting better, suggesting this stock is likely to move higher in the short-term.
As for the downside, important support is pegged at the RM1.30 mark, which is the 21-day simple moving average line. – By K.M. Lee
The comments above do not represent a recommendation to buy or sell.
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