HOT STOCK: Top Volume Stocks (Sime Darby, Maybank, Public Bank)

The violation of the KLCI index’s 1,600-pt psychological level this week saw increasing market attention towards the bigcap stocks. Today, we take a closer look at  some of the index heavyweight  big-cap stocks, in terms of identifying  the support and resistance levels, may shed some light on the sustainability of the index’s recent breakout. 

Sime Darby: Need to break resistance. We previously highlighted the likelihood of selling after the stock failed to violate the psychological RM10.00 in early March. Eventually, the stock retraced slightly and subsequently  found support at just above RM9.70. The new bottom was confirmed on Monday when it closed the highest in  three weeks, on a “Long White” candle. Thus, positions can be initiated above RM9.70  with a close below as  the  stop loss. A  close above RM10.00 is required to affirm the upward bias and the price targets are the gaps of March 2008 at RM10.70 and RM11.50. A failure to break RM10.00 will not bode well for the index and price weakness is to be confirmed by  the violation of RM9.70. Expect strong support at RM9.20, the gap of early February.

Maybank: Testing psychological level. The stock was highlighted in mid-March for its prospects of scaling higher. The stock has moved favourably and positions can be maintained as long as the stop loss below RM8.64 is not triggered. As expected, it is now testing the round figure RM9.00, also the 1-year high, and good momentum from the index’s breakout should see the violation of the RM9.00 level. A measured move based on the February rally could see the price go as high as RM9.30, while a strong move may even see a test of the psychological RM10.00 – a measured move based on the May 2010-June 2011 rally. A failure to break this level will not augur well for the index and a close below RM8.64 will confirm the price weakness. Support is expected at RM8.50 and the November-low of RM8.00.

Public Bank:  Holding above support. The index breakout also brought some life to  this stock’s  price  action. It has been trading listlessly for the past  two months, holding above RM13.60  – the year-long resistance that was violated in early February. But buying support was visible during its sideways move as seen from the consistent high volume, with the 50-day MAV line also rising. In fact, the stock bounced off  the MAV line twice in the past two weeks. Thus, positions can be initiated above RM13.60 with  the  stop loss on a close below. A close above  the  recent high of RM14.00 is required to confirm the upside bias and a measured move based on the Dec-Feb rally could see the stock at RM15.30. A failure to break RM14.00 may not bode well for the index and weakness will be confirmed if the stop loss is triggered. Look for support at RM12.85, the 50% retracement of the Sep-Feb rally.

Source: OSK188