HOT STOCK: Globetronics Technology Bhd - Nascent Uptrend

Globetronics could be in  its initial  uptrend  phase after confirming a higher low last month.  The high volume that accompanied the rise adds stronger conviction to the rally, which is likely to end the long-term downtrend.

The stock’s downtrend since early 2010 could be over after the steady rise in the past four months. The downtrend is quite pronounced,  as illustrated by the lower highs  right up to Jan 2012. The  gradually descending  200-day MAV line  also indicates the same negative trend.

But things took a turn in January as the price rallied for a couple of days and printed a 6-month high. The move was also accompanied by significant volume,  the highest in almost 2 years, which is a sign of  firm buying interest.  The rise was preceded by easing downward momentum, which led to a false breakdown in Dec 2011. The inability of a new low to elicit further selling was a telling sign that the downtrend may end. This upward move was soon confirmed by a new rally high being set in March. Note that the “Golden Cross” occurred in late March and the 50-day MAV line crossing above the 200-day MAV line is usually taken as a longer-term positive indication. Furthermore, the 200-day MAV line is rising too. 

All these factors point to a higher price and a good upward continuation should not see the stock closing below RM1.08, the broken resistance and also the high of January. Thus, purchases can be made at  the  current level or on a pullback towards the stop-loss level of RM1.08. A more conservative trader may opt for a close below the psychological RM1.00 as the  stop loss.  The price target is RM1.37 and a strong rally could even see  the stock testing the psychological RM1.50, provided that the 1½ -year high of RM1.26 is  successfully violated. All three resistance levels coincide with  the Fibonacci levels of the 2010-2011 decline.

However, a close below RM1.00 will significantly reduce the possibility of an upward continuation. Strong support should come at the February-low of RM0.92, a violation of which will likely signal the end of the 4-month rally.

Source: OSK188