Technical Highlights

The stock has been trading steadily upward along a robust trendline for the past 14 months, rebounding sharply each time it touches support. Now, it is forming an inverse head and shoulders pattern above this trendline and is currently in the process of completing the second shoulder. A successful bounce from this level could set the stage for a significant breakout. It is now trading above 200-day EMA but remains below the 20 and 50-day EMAs, which it could surpass upon a successful breakout.

Momentum indicators are positive. The RSI is at 41, showing neutral strength with upward potential. The MACD formed a golden cross in early September and continues to rise with volume, indicating strengthening bullish momentum.

The entry point would be around RM1.79, capitalising on a potential rebound from the second shoulder of the pattern. If the inverse head and shoulders pattern does not complete as expected, a secondary entry around RM1.76, closer to the macro uptrend line, presents a favourable risk-reward opportunity. The first key resistance is RM1.88, and a breakout above this would open the path towards the next resistance at RM2.06. On the downside, a drop below RM1.68 would invalidate the pattern and signal the beginning of a deeper correction.

Entry – RM1.76 – RM1.82

Stop Loss – RM1.68

Target Price – RM1.88 – RM2.06

Source: Mercury Securities Research - 27 Sep 2024