SUPPORTLINE by FONG MIN YUAN

DUFU Technology Corp Bhd is struggling to exit from consolidation mode as it attempts to recover from a prior correction. The stock, which was on a steep advance between the months of July and November 2018 entered into a correction phase by early December that same year. The share price lost over 40% of its value within a month, hitting a low of RM1.35 on Jan 4, before stabilising and entering a sideways trading channel. On Monday, however, the stock showed signs of returning momentum. Tuesday’s performance helped to confirm the return of buying interest as the share price gapped up at the opening bell and proceeded to an intra-day high of RM1.81. A lower closing at RM1.73, however, suggests that some profit-taking has set in. The counter is not out of the woods as the 50-day and 100-day simple moving averages (SMA) lie overhead as obstacles to the rally. Short of convincingly breaching the uppermost 50-day SMA at RM1.94, the daily price chart remains under the control of the bears. A sustained advance past the resistance would be a bullish event for the stock as it will signify a return of positive sentiment and open the gates for the bulls to roam towards the next resistance at RM2.20. The technical indicators continue to paint a promising picture. The slow-stochastic momentum index has spiked towards 66 points, signifying a strong pickup in momentum. The 14-day relative strength index also shows strong momentum although it is subsiding from overbought territory at 71 points. Meanwhile, the daily moving average convergence/divergence line is gaining height over the signal line, which indicates a return to an uptrend. A crossing of the zero line should coincide with a breakout on the share price chart. Meanwhile, RM1.50 serves as a supporting level, being the lower the lower end of the trading channel over recent weeks.

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

Note: This article first appeared in StarBiz Premium yesterday.