KIAN JOO

Technical Interpretations:

¨      Over the last one year, KianJoo’s share price ride an uptrend above the trend line (alternating between upswings and corrections) before a correction saw it fall from its year-high of RM2.56 in Apr to a low of RM1.91 in May.

¨      Although the stock’s price fell through the trend line, it found support at the RM1.91 level and subsequently staged a technical rebound to a high of RM2.06 on 31 May. Note that the stock found support above the 10-day SMA (RM1.975) (despite a pullback) and continued consolidating above it over the next few days.

¨      Yesterday, the stock saw a surge in trading volume of 2.1m shares which lifted its share price to a high of RM2.05 (from its opening of RM1.98) before pulling back to close at RM2.02.

¨      Consequently, yesterday’s spike in KianJoo’s share price saw both the RSI (49.894 pts) and Stochastic tip upwards to indicate strengthening buying momentum in the immediate term.

¨      While both the MACD line and signal line are within the negative region, the MACD line cut above the signal line to indicate a more bullish outlook in the immediate term. Note that both the MACD and signal line are pressing towards the positive region.

¨      Furthermore, the decreasing divergence of the 10-day SMA (RM1.975) below the 40-day SMA (RM2.094) indicates a recovery in the stock’s bullish momentum.

Daily Trading Strategy:

¨      Technically, we expect the positive indication of the short-term indicators and the bullish momentum from the fresh spike above the 10-day SMA (RM1.975) to drive KianJoo’s share price towards the 40-day SMA (RM2.094) in the short term. In the event of a breakout above the 40-day SMA, we expect the bullish momentum to drive the stock’s price to its next resistance of RM2.16 in the short term and RM2.30 in the medium term.

¨      Nevertheless, we highlight that the stock would first need to remove its immediate resistance of RM2.06 to turn its immediate outlook positive (from negative currently) and revive its upward rally.

¨      Hence, we still see an opportunity for investors to buy at yesterday’s close of RM2.02 and take profit towards RM2.09 (40-day SMA) in the short term and RM2.16 in the medium term. Optimistic investors (betting on an extended rally) may, however, choose to ride the rally towards the resistance of RM2.30 over the longer term.

¨      Although we are optimistic on the stock’s uptrend in the immediate term, conservative investors (in anticipation of a pullback) may choose to buy towards the immediate support of RM1.98 (10-day SMA) for a better bargain while aggressive investors may buy on breakout at above RM2.06.

¨      On the downside, we expect a good support at RM1.91. Breaching this level would, however, turn its immediate outlook negative and lead to its share price falling to its next support of RM1.77. Note that a further breaching of RM1.77 would turn the overall outlook negative. Hence, short-term investors should cut loss if the price breaches RM1.91 while medium-term investors may choose to cut loss at below RM1.77.

Overall, we see a reasonable risk to reward ratio for investors with a theoretical entry price of RM2.02 given that the downside to its support of RM1.91 is 9 sen, while the upside to its resistance of RM2.09 and RM2.16 is 7 sen and 14 sen respectively

RHB RESEARCH