TM experienced a major technical breakdown last Friday as it violated the 100-day MAV line. This moving average line has become a crucial support line for the stock after it successfully rebounded off the line for four times since mid-2011, as highlighted by the circles in the chart. Hence, the stock’s recent failure to hold up this line led to heavy selling pressure.
Judging by the selling momentum, it seems like TM’s share price could retrace further, potentially towards the 200-day MAV line, which is another meaningful moving average line for the stock. As highlighted by the triangles in the chart, the stock rebounded twice off the 200-day MAV line before, once in late 2010 and another in 2011.
Should the share price retrace towards the 200-day MAV line, we will see if TM could build a new base above the line. If not, another violation of this line will likely see the stock retrace further, possibly towards the RM5.21 low recorded in May 2012.
Meanwhile, we have drawn a short-term downtrend line to gauge when the correction will come to and. A crack above the downtrend line will likely signal the end of the correction phase.
The 200-day MAV line, which now lies at the RM5.56 level, is now the immediate strong support, followed by May 2012’s low of RM5.21 level. To the upside, look for the 100-day MAV line or the RM5.93 level as the immediate resistance. Next resistance is seen at the RM6.16 level.
Source: OSK
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