Breakout From
Short-term Downtrend Line
In January, we advised traders to accumulate DRB-Hicom’s
shares after a strong intra-day rally, which more or less confirmed that a new
floor had been constructed at the RM1.98 level. Subsequently, its share price
has also appreciated aggressively and eventually reached our RM2.50 price
target. Meanwhile, it seems that the price retracement of late has found
support at the RM2.48 level and the Monday’s violation of the short-term
downtrend line has triggered a Buy signal. Hence, we advise traders to
accumulate shares of DRB-Hicom now. The upside target is pegged at the
RM2.93 level but traders should cut loss should the critical RM2.48 support
floor be taken out. As mentioned above, we
had previously advised traders to
accumulate DRB-Hicom’s shares after the stock recorded a strong rally on
15 Jan 2012, which more or less
confirmed that a new floor had already been constructed at the RM1.98 level.
Figure 2 illustrates the technical landscape at that time.
DRB-Hicom has been in
retracement mode after reaching the RM3.26 peak in early February, but it seems
to have found support at the RM2.48 level, as evidenced by the rebounds seen in
the 1-5 March period and two days ago. As the rebound, which emerged from the RM2.48 level
two days ago, has also violated the short-term downtrend line, a new
trading opportunity has arisen.
We advise traders to accumulate DRB-Hicom’s shares after the
breakout. The recent major peak of RM2.93 is our upside target but prior to
this level, resistance can be seen at the RM2.84 level. Traders should consider
cutting loss if the share price violates
the critical RM2.48 support floor.
In the event that the critical RM2.48 support level is
violated, a major breakdown will be triggered and its share price is expected
to retrace to the RM2.40 level or even to the strong support area of
RM2.30-RM2.33.
Source: OSK188
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