MI TECHNOVATION Bhd (stock code: 5286) made a break out of a 11-month descending trend line it has been dwindling under in Friday trading, marking just the second time it has successfully breached the downtrend over that period of time.
The share price gapped up at the start of Friday trading and pulled ahead of the 100-day simple moving average (SMA) to an intra-day high of RM1.94.This marks a significant turn of events for the technology counter, which was listed in June last year and has spent much of the time since then in bearish straits.
With the growing positive sentiment, there is an opportunity for the stock to reverse its fortunes by pushing ahead towards the overhead resistance at RM2.02.The 200-day SMA rests just overhead, and a successful challenge of the long-term moving average would signal the return to a long position
Given the strong rally experienced so far, the technical indicators have risen to overbought positions, which heightens the risk of consolidation over the coming term.The slow-stochastic momentum index has touched 78 points, which is just under the overbought line, while the 14-day relative strength index, also at 82 points, has entered overbought mode.
A positive signal comes from the daily moving average convergence/divergence (MACD) line, which has crossed above the signal line in negative territory.The movement signifies a return to bullish momentum, and in crossing the zero line, the MACD will signal the return to a positive trend
Some profit-taking is to be expected given the overbought levels of buying, and it seems unlikely that the share price will make it past the overhead resistance of RM2.02 without a brief consolidation period.
However, should the buying interest be sustained and the MACD signals a stronger uptrend, the share price should be able to survive brief bouts of profit-taking. In the event of a sharper retreat, support for the counter rests at RM1.80, while next support is pegged at RM1.55.
The comments above do not represent a recommendation to buy or sell.