PETRONAS CHEMICALS GRUP BERHAD (Technical Buy)

• After peaking at RM7.65, PCHEM's stock price experienced an 8.4% pull-back to RM7.01 before stabilizing around the RM7.20 range over the last four trading sessions. This behaviour indicates the formation of a support level.

• Technically speaking, the stock's short-term 5-day Simple Moving Average (SMA) is nearing convergence with its long-term 13-day SMA, signalling a potential trend reversal. Additionally, both the stochastic oscillator and the Tom Demark Pressure Ratio (TDRP) exhibit early indications of an upward trajectory. This, along with increasing trading volume, suggests that renewed buying interest could be imminent.

• A break above the immediate resistance level of RM7.35 could set the stage for a rally to RM7.65, which aligns with the stock's 200-week SMA, and potentially to RM7.80 thereafter. On the flip side, falling below the critical 200-day SMA support of RM7.15 could trigger a downward adjustment to RM6.89.

• We recommend initiating a trading position at RM7.28, targeting a take-profit level of RM7.65, which offers an estimated upside of roughly 5.1%. To mitigate risk, we advise setting a stop-loss at RM7.10, in line with the stock's 13-week SMA, corresponding to a potential downside of approximately 2.5%.

Source: Kenanga Research - 31 Oct 2023