PETRONAS CHEMICALS GROUP BERHAD (Technical Buy)

• PCHEM's stock price, after reaching a peak at RM7.65, experienced an 8.4% pullback to RM7.01 before stabilizing within the RM7.01-RM7.35 range over the past two weeks, indicating the formation of a support level. Furthermore, recent price movements exhibited a classic bullish divergence, with the share price recording a higher low while the Stochastic Oscillator displayed a lower low, suggesting a potential bullish outlook.

• From a technical perspective, the stock's short, medium, and long-term (5/13/50-day) Simple Moving Averages (SMA) have converged, signalling a possible trend reversal. Additionally, the stochastic oscillator shows early signs of an upward trajectory, hinting at renewed buying interest.

• A breakthrough above the immediate resistance at RM7.35 could pave the way for a rally to RM7.65, aligning with the stock's 200-week SMA, and potentially to RM7.80 thereafter. Conversely, a drop below the critical 200-day SMA support at RM7.12 might trigger a downward adjustment to RM6.89.

• Our recommendation is to initiate a trading position at RM7.28, targeting a take-profit level of RM7.65, offering an estimated upside of approximately 5.1%. To manage risk, we advise setting a stop-loss at RM7.00, corresponding to a potential downside of around 3.9%.

Source: Kenanga Research - 8 Nov 2023