HOT STOCK: Malaysian Resources Corporation- Extending Downtrend

It looks like little has changed on MRCB’s longer-term technical outlook since our previous update in September last year when the stock violated the mid-term uptrend line beginning from the major low created in October 2008. The stock may be re-testing the 200-week MAV line after violating the short-term uptrend line, which basically extends the downtrend that took a breather during the Sept 2011 – Jan 2012 period. In view of the stock’s current weakness, we suggest that traders avoid the shares. We are eyeing the 200-week MAV line as the downside target.

In our previous note on MRCB, the stock was at that time potentially creating a “Long Leg Doji” or “Hammer” at the 200-week MAV line, but it eventually ended up creating a “Spinning Top” at this  line instead.  The stock  also subsequently cracked above the short-term downtrend line and started rebounding during the Sept 2011-Jan 2012 period.

Nevertheless, since MRCB violated the short-term uptrend line two months ago, we think the above-mentioned rebound was just a  breather for the sharp fall resulting from the major breakdown  from the mid-term uptrend line. Hence, we advise the traders to sell MRCB shares or avoid the stock. It appears as if the stock will be re-testing the 200-week MAV line which now lies at the RM1.53 level.  Should  our expectation  materialize,  it simply means that  the stock  is extending  its downtrend after violating the mid-term uptrend line.

Immediate support is found at the RM1.63 level while critical support lies at the 200-week MAV line. To the upside,  the RM1.95, RM2.11 and RM2.27 are the resistance levels.

Source: OSK188