DXN HOLDINGS BERHAD (Technical Buy)

• After reaching an all-time intraday high of RM0.77 on July 31, DXN experienced a downward correction of 21%. As of yesterday's close at RM0.615, the stock displayed a Doji candlestick pattern on its daily chart, indicating current market indecision. However, the formation of a Doji during this downward phase could signal a "morning star doji" pattern if the stock price rises today, suggesting a potential bullish reversal.

• On the technical front, both the stochastic oscillator and the Tom Demark Pressure Ratio (TDRP) have entered oversold territory. This increases the likelihood of a trend reversal, making it a critical point for investors to watch.

• In terms of price levels, a sustained close above yesterday's closing price of RM0.615 could act as a catalyst for the stock to rally towards RM0.645 and potentially RM0.67 thereafter. On the contrary, a breach below the immediate support level of RM0.605 could trigger a fresh downtrend.

• We recommend initiating a position at the current price of RM0.615, with a partial take-profit target set at RM0.645 and a subsequent target at RM0.67. This strategy offers an estimated upside potential of approximately 7%. To mitigate downside risk, we suggest placing a stop-loss order at RM0.600, corresponding to a downside risk of roughly 2.4%.

Source: Kenanga Research - 18 Oct 2023