HOT STOCK: Genting Bhd- Still in Consolidation Mode

Still in Consolidation Mode

On 4 Jan 2012, we advised  traders to accumulate Genting’s shares after the stock finally cracked above the RM10.00-RM11.06 consolidation phase. Surprisingly, on the 5^th trading day after its breakout, the stock actually retraced below the RM11.06 level and triggered our cut-loss order. Even now, it is still consolidating the strong gains chalked up in Oct 2011 but  is trading  within a new consolidation zone ranging  from  the  RM10.00 to RM11.32 level. Traders can still accumulate the shares during this consolidation or wait for the stock to break out at the RM11.06 level as Genting is still in a good position to violate the RM11.98 historic peak. 

In retrospect, Genting rebounded sharply in October 2011 after finding support at the 38.2% Fibonacci retracement level of the March 2009-Dec 2010 rally. Since then, the stock has been spending time consolidating the strong gains recorded that month. It has been consolidating between the RM10.00 and RM11.06 levels previously, but due to the fake breakout from the consolidation phase two months ago, a new consolidation zone ranging from RM10.00 to RM11.32 has emerged.

The fake breakout triggered our cut-loss order. Nevertheless, traders can still accumulate Genting’s shares now as it is still within the consolidation zone  and is in a good position to crack above the RM11.98 historic peak after creating a “Long White Day” at above the 38.2% Fibonacci level of the March 2009-Dec 2010 rally. The more conservative traders may want to wait until a breakout occurs, but we think it would be alright to accumulate its shares during the consolidation phase as its price action has been constructive since October’s strong gains. A break above the consolidation zone is likely to see Genting surpassing the RM11.98 historic peak. Our cut-loss point is pegged at below the RM10.00 mark.

Hence, resistance lies  at the RM11.32 and RM11.98 levels. Should the RM10.00 support  floor be violated, additional supports can be found at the RM9.00 and RM8.37 levels. As far as Genting’s long-term technical outlook is concerned, it is still firmly bullish and the end of the current consolidation phase will see the stock extending its uptrend.

Source: OSK188