WILLOWGLEN MSC Bhd (code: 0008) rebounded yesterday after a correction and crossed above the 200-day simple moving average (SMA) in intra-day trade.
While there was a spurt of positive momentum in yesterday’s trading following the share price rising 3.5 sen to 49.5 sen to the intra-day high, the stock erased gains later in the day to close slightly higher. Nevertheless, the advance put the share price within reach of the immediate resistance of 50 sen and on a more bullish trajectory.
During a prior advance, the stock hit the 52-sen mark before it turned back. In the event the share price surpasses the immediate hurdle of 50 sen, it will attempt to challenge this previous high.
At present, there isn’t enough evidence to suggest that the rally is sustainable.
The counter has been trapped under a bearish outlook since the share price fell off a cliff in the second half of 2017.
While the breach of the 200-day SMA is a positive development, there needs to be follow-through buying to spark an uptrend. Trading in the counter remains unimpressive, suggesting that a strong buying catalyst is yet to enter the market. There is an uptick in the 14- and 21-day SMAs but the 50- and 100-day SMAs have converged near the 46-sen level, and given their flattish trajectory, remain uncommitted to a rally.
Looking to the technical indicators, the slow-stochastic momentum index continues to fall towards oversold conditions. The percent K oscillator rests at the oversold line at 20 points, below the percent D oscillator, suggesting a weak momentum. The 14-day relative strength index, however, perked up with yesterday’s advance, and is rising at 52 points.
The daily moving average convergence/divergence line narrowly escaped returning below the signal line and remains southbound to suggest it is growing weaker.
Given the weakening signals, there is a likelihood of consolidation over the immediate term, suggesting that yesterday’s advance may be an opportunity to lock in profit.
In the event of a retreat, the share price can been seen falling to 47 sen with the nearby SMAs at 46 sen offering further support.
The comments above do not represent a recommendation to buy or sell.