SUPPORTLINE

DAGANG NeXchange Bhd has been flirting with the support line at 37 sen during a period of consolidation.

Since pulling back in June, the stock has been trapped under a resistance of 42.5 sen. Tuesday’s performance, which saw the stock pushing to a session high of 40 sen, may just be another attempt at challenging the obstacle. Nevertheless, it has returned to above the 50-day simple moving average (SMA), suggesting that the support is holding and there is strength yet in its attempt to return to a more bullish footing.

The trading volume picked up slightly over recent days to return to levels seen in early August. Nevertheless, the investor interest is short of levels encoun- tered during periods of the stock’s rally. The longer-term outlook for the counter remains bearish, given the negative crossings of the SMA.

Over the immediate term, the share price may challenge the 42.5-sen level, which coincides with the uppermost 200-day SMA, a breach of which would see the counter return to a bullish trend. This would be followed by a potential rise to the next target of 46.5 sen, set in June.

The bottom limit of the current trading channel remains intact at 37 sen, although a break down below this level would be a very bearish indication for the stock.

There is budding strength in the technical indicators although they remain mixed.

The slow-stochastic momentum index has risen past the midway mark to the 53-point level. The 14-day relative strength index is similarly developing positive momentum at 59 points.

The daily moving average convergence/divergence line has yet to confirm the resumption of a positive trend as it sits below the signal line in negative territory. A positive crossing of the indicator and a return above the zero line would confirm a renewed uptrend.

The comments above do not represent a recommendation to buy or sell.

Note: This article first appeared in StarBiz Premium yesterday.