Record Volume May
Spell Trend Change
MISC has been trending lower after peaking in 2007 but the
stock’s recent record trading volume opens up the possibility of a change in
its 5-year trend. However, the stock
must hold at the current psychological
support at RM5.00 and successfully violate the 200-day
MAV line to confirm the change in its longer term trend.
There is no doubt that MISC is on a longer-term downtrend,
which is clearly illustrated by the series of lower highs and the declining
200-day MAV line. The downtrend saw the stock shedding by
half its 2007 peak price of RM10.00. However, a change in trend could
be in store if the share price can hold above its recent low at the
psychological RM5.00. The stock’s recent record volume would certainly have
caught the attention of bottom-fishers as this could signal the return of
buyers and the flushing out of weak hands by strong hands. In fact, steady
buying was seen throughout March, during which the gradual rise in volume
culminated in the recent one-day volume spike. The candles formed last week
also indicate buying, with a “Long Legged Doji” and “Dragonfly Doji” appearing
on 14 and 15 March respectively. The pair of “Dojis” highlights the lack of
follow-through selling as the pair came after the “Long Black” of 13 March.
Nonetheless, in light of the longer term trend, only a
short-term bottom can be expected at the moment. This expectation will require
a close above the “Long Black” candle high of RM5.25, which happened yesterday
via a “Long White” candle. Thus, a purchase can be made now or on
a pullback towards the stop loss
at the psychological RM5.00
level. The price target is the gap of 23 Feb at RM5.75, which is a recoup of
62% of the Feb-March decline.
The possibility of a change in the longer term trend will
rise if the stock can break above RM5.75. This change in trend will only be
confirmed if the price violates the 200-day MAV line, which now lies at RM6.50.
Resistance is also expected at the 100-day MAV line – now at RM6.00 – which
acted as the dynamic resistance level a number of times last year. However,look for the
downtrend to continue should the stop loss be triggered, with RM4.40 as the
next target, which is a measured move based on the Nov-Dec 2011 decline.
Source: OSK188
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