Major Breakdown at
200-day MAV Line
Yesterday, Dialog experienced a major breakdown when it
violated the 200-day MAV line. The significance of this moving average line to
the stock is clearly highlighted in the
daily chart below. A sell signal
was triggered yesterday and the breakdown
is expected to drag its share price down to the RM2.10 level, or even the
RM1.96 and RM1.82 levels, unless the stock stages an immediate rebound back
above the MAV line and render yesterday’s price action a fake breakdown.
The 200-day MAV line has played a significant role in
determining Dialog’s near-term price movement, as its importance is highlighted
in the above daily chart. In Sept 2011, its share price tumbled after it violated the 200-day MAV line. In the months that
followed, Dialog made five failed
breakout attempts at this moving average line. When it eventually pierced through
this 200-day MAV line in Dec 2011, strong breakout gains followed. And when the stock was
consolidating those breakout gains, it also found support at the moving average
line.
It is clear that market participants are watching the
200-day MAV line closely. Hence, yesterday’s violation of the moving average
line represents a major breakdown, which is expected to drag the share price to
the next strong support floor at RM2.10. Should this level be taken out as
well, we are eyeing the RM1.96 and RM1.82 levels as the next downside targets. Having
said that, we still do not rule out the
possibility of a fake breakdown as the yesterday’s breakdown led to only a slightly
more than 2% loss and the 200-day MAV line has been violated for just a day.
If yesterday’s breakdown was genuine, Dialog’s its share
price is likely to drop to the RM2.10 support floor. Expect another round of
strong selling pressure should the RM2.10 level be violated, after which
additional supports lie at the RM1.96 and RM1.82 levels. The 200-day MAV line
which now lies at the RM2.32 level is the immediate tough resistance, while
another tough one lies at RM2.52. The
stock’s near-term technical outlook will be firmly bearish at any price below the 200-day MAV line.
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