Eye On Stock: GFM Services

GFM Services Bhd (code: 0039) has put in yet another stellar week of gains to return to a three-month high of 52 sen a share.

This recovery comes after a steep selldown after the stock hit a peak of 53 sen on Aug 21, which bottomed out at a low of 36.5 sen on Oct 19.

This most recent leg of recovery sees the share price returning to pre-correction levels but the question remains if the rally is due to stall.

The push for higher ground has taken the stock from below the key simple moving averages (SMA) to above them. At yesterday’s intra-day high of 52 sen, it had crossed the uppermost 200-day SMA at 51.5 sen.

Given the overbought levels of the momentum indicators, however, there is a strong likelihood that there will be a rejection of the 200-day SMA moving forward and a return to lower ground.

Nevertheless, all is not lost as the bulls remain strongly in control and a brief retreat before a return to gains could indicate a healthy rally.

The slow-stochastic momentum index is currently at the overbought level of 89 points, with the percent K oscillator slipping just below the percent D oscillator.

The 14-day relative strength index is showing signs of fading from the overbought condition of 82 points.

The daily moving average convergence/divergence line remains at an ascending trajectory, putting more distance with the signal line, suggesting that this uptrend has legs.

Moving higher up the daily price chart, the share price could be looking at an immediate target of 53 sen and assume August pre-correction levels before entering consolidation mode and awaiting the technical indicators to neutralise.

Should there be a resumption of the rally, the bulls will roam higher towards the 58-sen level, which would push the stock closer to the year’s highs.

The immediate support rests at 50 sen although 48 sen serves a stiffer support. The risk runs at risk of re-entering consolidation mode if it should fall through this mark and towards 46 sen, suggesting that the bulls have lost their footing.

The comments above do not represent a recommendation to buy or sell.