SIME DARBY BERHAD (Technical Buy)

• Sime Darby Bhd (SIME) closed at RM2.42 yesterday, rising 4.31%. The stock broke out to above its 5-day Simple Moving Average (SMA) of RM2.37 on increasing volume and closed right at its 13-day SMA of RM2.42, signalling a strong rebound from its recent lows.

• From a technical standpoint, the stochastic oscillator is trending upward from oversold territory, reflecting growing buying momentum. Meanwhile, the Tom Demark Pressure Ratio (TDRP) has risen to 30.52, showing a reduction in selling pressure. The RSI is also trending higher, supporting a more bullish outlook.

• Key resistance levels include RM2.48, which aligns with the 50% Fibonacci retracement level, and RM2.60, aligned with the 38.2% Fibonacci retracement level. A break above these levels could pave the way for further gains. On the downside, strong support is found at RM2.42 (13-day SMA) and RM2.37, which aligns with the 61.8% Fibonacci retracement level, offering solid protection against declines.

• With the stock displaying positive technical signals, we recommend entering around RM2.42. Setting a take-profit target at RM2.58 offers an upside potential of approximately 6.6%. For risk management, placing a stop-loss at RM2.29 limits potential downside to around 5.3%. This presents a balanced risk-to-reward opportunity for short-term traders.

Source: Kenanga Research - 26 Sept 2024