[Business Times] Guan Chong likely to grapple with intermediate-term resistance

CONTINUING rebounds on the local stock market provided the follow-through momentum that moved the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) higher last week.

It trended within an expanded trading range of 68.27 points and staged a follow-through rebound to close at 1,688.65 points on Friday.

However, mixed performances on the Wall Street and regional stock markets did not in any way damage the market sentiment on the local front.

The index continued to rebound further last week. It stayed above its immediate downside support of 1,680. It registered a week-on-week gain of 17.02 points, or 1.02 per cent.

Viewing the performances of the benchmark index, there were 24 gainers and five losers with one counter unchanged.

The FBM KLCI hit a low of 1,632.28 on Wednesday before rebounding to a high of 1,700.55 on Thursday, giving the key index a trading range of 68.27 points.

On Bursa Malaysia, the FBM Small Cap Index added 2.82 per cent to 12,467.14 while the FBM ACE Market Index was flat at 4,008.34 on Friday.

In New York, the Dow Jones Industrial Average stayed above its major psychological support of 14,000. The Dow closed marginally lower at 14,565.25 points, with a week-on-week loss of 13.29 points, or 0.09 per cent.

Tech stock-heavy Nasdaq Composite Index moved in unison with the broader market last week. The Nasdaq Composite Index closed lower at 3,203.86 points last Friday, with a week-on-week loss of 63.66 points, or 1.95 per cent.

Back on the home front, Guan Chong Bhd (GCB) staged a technical rebound last week. Its daily price trend rebounded to close at RM1.91 on Friday last week, posting a gain of 13 sen, or 7.30 per cent.

The following are readings of some of GCB’s technical indicators:-

Moving Averages: GCB’s daily price trend continued to stay above its 10-, 20-, 30-, 50-, 100- and 200-day moving averages at the market close last Friday.

Momentum Index: Its short-term momentum index continued to stay above the support of its neutral reference line last week.

On Balance Volume (OBV): Its short-term OBV continued to stay above the support of its 10-day moving averages.

Relative Strength Index (RSI): Its 14-day RSI has since stayed above the 50 level while its technical reading stood at 78.91 per cent at the market close on Friday.

Outlook

Share prices on the local bourse staged follow through rebounds last week. Select second and third liners remained the focus of trade last week. GCB was one of these counters with a week-on-week gain of 13 sen, or 7.30 per cent.

GCB’s monthly price trend staged a technical breakout of its intermediate-term downtrend. It continued to stay above its downtrend on Friday.

Its weekly price trend staged a successful technical breakout of its intermediate-term downtrend (See GCB’s weekly price chart – B3:B4) and has continued to stay above it. Also, it stayed above its intermediate-term uptrend support (B1:B2) on Friday.

Its daily price trend staged a technical breakout of its intermediate-term downtrend resistance (See GCB’s daily price trend – C1:C2) on Friday. GCB’s daily and weekly fast MACDs (moving average convergence divergence) stayed above its respective slow MACDs on Friday last week. However, its montly fast MACD was below its monthly slow MACD.

Meanwhile, its 14-day Relative Strength Index (RSI) stood at 78.91 per cent last Friday. Its 14-week and 14-month RSI were at the 59.56 per cent and 59.96 per cent levels, respectively.

Looking at the company’s Stochastics Oscillator, it clearly shows that GCB’s daily price trend remains in an uptrend mood.

Judging from the technical breakout of its intermediate-term downtrend resistance (C1:C2) on its daily price chart, GCB’s price trend is likely to move towards its intermediate-term resistance zone (RM2.00- RM2.20 level).

The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.

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