Eye on Stock

KAREX Bhd (code: 5247) has been wallowing in the doldrums since May 24, 2017, where it began its decline from a peak of RM2.26.

The short-term declining trend line is well established for this counter as it continues to exert enormous downward pressure on the share price. The simple moving averages (SMAs) have taken bearish positions in relation to each other due to negative crossings during this decline.

Based on the daily price chart, it would take persistent positive momentum to get it past the defining trend line, although at present there is little indication of the type of strength required for a challenge.

Given the tenuous nature of this recent rise in share price, a holder of this stock may consider cashing in on gains made in the current positive retracement. The stock hit a recent low of 76 sen this past Monday before halting its descent and edging slightly higher over the course of the week.

The slow-stochastic index, however, issued a warning to investors as the counter arrived at its Friday session high of 84 sen, The index suggested a divergence in its movement with that of the share price; while it hit a higher high, the share price charted a lower high, indicating that the positive retracement might not sustain itself.

At the day’s peak, The stock has crossed the short-term 14- and 21-day SMAs but lay at some distance from the 50-day SMA, which sits tantalisingly at the RM1 mark.

For the immediate-term, more bullish investors can pin their hopes on the stock closing in on some distance to this resistance level, which sits at a 16 sen premium to Friday’s session high of 84 sen.

The daily moving average convergence/ divergence histogram remains deeply submerged in negative territory although it is now peeking up above the trigger line. It is only budding momentum, and does not confirm a sustained uptrend.

Meanwhile, the 14-day relative strength index sits at 44 points, below the 50-point midway mark.

At present, the downtrend remains intact and a further decline may see the stock re-test the recent low of 76 sen before approaching its historical low of 68 sen. The comments above do not represent a recommendation to buy or sell.