Aug 16, 2011

Muhibbah Engineering (MUHIBAH) Technical Analysis

Muhibbah Engineering (MUHIBAH) Technical Analysis
Rising From The Bottom Of The Pit…

Technical Interpretations:
♦  Since hitting a year high of RM1.93 in Jan, Muhibbah saw its share price correcting to a low of RM1.30 in Mar before a new wave of buying momentum lifted its share price to a high of RM1.91 on 15 Jun. 
♦  Failing to remove its previous high of RM1.93, the stock’s price subsequently plunged to a low of RM1.34 on 23 Jun. Although the stock staged a technical rebound to a high of RM1.46 on 29 Jun, it resumed its downtrend to a low of RM1.02 on 8 Aug. 
♦  On 9 Aug, however, the stock registered a long-white candlestick to close at RM1.17 (from its open of RM1.00). Note that the stock’s price staged a breakout above the 10-day SMA the following day. 
♦  Yesterday, the stock resumed its uptrend by registering  another long-white candlestick to hit a day-high of RM1.33 (from its open of RM1.18) before closing slightly lower at RM1.32. Note that the stock saw a relatively high trading volume of 11.3m shares yesterday. 
♦  Noticeably, the surge in the stock’s price over the last few days saw the RSI (55.755 pts) and Stochastic increase to indicate a return of buying momentum. Note that the RSI also crossed the 50 pt level. 
♦  Furthermore, the increasing divergence of the MACD line above the signal line (despite both lines remaining in the negative region) indicates a possible change of the  stock’s short-term outlook to positive (from negative currently).
♦  This is further confirmed by the flattening of the 10-day SMA (RM1.202) below the 40-day SMA (RM1.297). Note that any decrease in the 10-day SMA’s divergence below the 40-day SMA is a step closer to a possible change in the stock’s medium-term outlook to positive (from negative currently).

below: Muhibbah Engineering daily chart (click to enlarge)


 Daily Trading Strategy:
♦  Overall, we expect Muhibah’s share price to breakout above its immediate resistance of RM1.34 and continue its uptrend towards the next resistance of RM1.43 in the short term and RM1.52 in the medium term (given the recent breakout above the 40-day SMA). In the event of a further breakout above the RM1.52 resistance, we
expect the bullish momentum to drive the stock’s price towards the next resistance of RM1.62.
♦  Hence, we advise investors to buy  towards the immediate support of RM1.30. Conservative investors may, however, choose to buy towards the 10-day SMA (RM1.202) for a better bargain. 
♦  Although we expect good support at RM1.16, breaching this level would turn its immediate outlook negative and the stock’s price may have a remote chance of redeeming its uptrend in the near term (given the bearish market sentiment). Hence we advise investors to cut loss if the price breaches RM1.16.
♦  Nonetheless, we see a good risk to reward ratio for investors with a theoretical entry price RM1.30 given that the downside to its support of RM1.16 is 14 sen while the upside to the resistance of RM1.43 and RM1.52 is 13 sen and 22 sen respectively.

by RHB Research