GUAN CHONG BERHAD (Technical Buy)

• Guan Chong Bhd (GCB) closed at RM2.96 yesterday, rising 2.42%. The stock is currently trading above its 5-day Simple Moving Average (SMA) of RM2.85 with increasing traded volume. The recent rebound from its 200-day SMA at RM2.76, which coincides with the 61.8% Fibonacci retracement level, highlights a strong support base near the RM2.76 level.

• From a technical perspective, the stochastic oscillator is showing upward momentum from oversold levels, signalling renewed buying interest. Additionally, the Tom Demark Pressure Ratio (TDRP) has moved above the 20 threshold, now sitting at 30.8, indicating diminishing selling pressure. The Relative Strength Index (RSI) is also trending upwards from oversold territory, reinforcing a strengthening bullish sentiment. The weekly chart echoes this bullish setup, further supporting a positive outlook.

• Key levels to monitor include the immediate resistance at RM3.00, aligned with the 13-day SMA. A break above this could push the stock towards RM3.34, corresponding with the 38.2% Fibonacci retracement level. On the downside, key support lies at RM2.85 (5-day SMA) and RM2.76 (200-day SMA), providing robust support against further declines.

• Given these bullish technical indicators and the potential for continued upward momentum, we recommend accumulating the stock around the RM2.85-RM2.90 range. Setting a take-profit target at RM3.33 provides an upside potential of 14.8%-16.8%. For risk management, placing a stop-loss at RM2.63 would limit downside risk to 7.7%-9.3%. This strategy offers a favorable risk-to-reward ratio, making GCB an attractive option for short-term gains

Source: Kenanga Research - 25 Sept 2024