EYE ON STOCK, TOP GLOVE CORP

DESPITE the one-day plunge on July 9 that saw Top Glove Corp Bhd (code: 7113) lose about a quarter of its value, the stock has pushed back against the 200-day simple moving average (SMA) and kept moving forward with a bulish bias.

There was a strong rebound following the decline and the stock managed to return to a Sept 3 high of RM11.28.

Consolidation ensued and the counter traded range-bound over the ensuing weeks.

There have been some dips, but the 200day SMA has proved itself a reliable support, remaining intact although it was briefly breached on July 9.

Now supported above the RM10 mark, the counter is seeing some pick-up in momentum. There looks to be some build-up to challenge the RM11.28 resistance. A breach of this hurdle would see the share price approach the next target of RM12.

The technical indicators are painting a positive picture with improvements in all the key indices. The slow-stochastic momentum index has pushed higher to 69 points.

In two previous attempts, the index retreated before it crossed into overbought conditions. Some investor confidence will be needed to give the stock a sustained push before the momentum wanes.

The 14-day relative strength index has also risen to 64 points, which suggests more room to grow. The daily moving average convergence/divergence line has crossed the signal line to indicate a “buy” signal. The index is also turning positive as it is on the verge of crossing the zero line.

Given the current indecision in the stock as evidenced by the range-bound trading, there needs to be a positive catalyst for the stock to break through to the next, higher resistance. The downside gap left behind on July 9 remains only partially closed, lending further attraction to the RM12 target.

Immediate support lies at RM10.50, which serves also as an approximate mid-point for the stock’s current trading range.

Below that, the stock will find further support at the 200-day SMA, a negative crossing of which would signal a bearish turn for the counter. The comments above do not represent a recommendation to buy or sell.