Friday, 16 March 2012

HOT STOCK: Dialog Group Bhd - Major Breakdown at 200-day MAV Line


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.

Source: OSK188

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