Eye On Stock

REDTONE International Bhd (stock code: 0032) sustained a rebound on Friday and looked set to return to a positive trend.

The stock gapped up at the opening bell with the onset of rapidly growing momentum. The share price met the short-term 14and 21-day simple moving averages (SMA) and was on the verge of returning above a two-month positive trend line that had been formed between August and October this year. A bullish crossing of the said resistances would signal further gains for the stock, whose outlook has turned convincingly bullish.

Friday’s performance triggered a “buy” signal in the slow-stochastic momentum index as the percent K oscillator crossed higher than the percent D oscillator.

The index had fallen to oversold conditions prior to the reversal, which saw it rise to neutral territory at 26 points.

The 14-day relative strength index has also returned from oversold conditions, and is currently growing higher at 49 points.

The daily moving average convergence/ divergence line remains in positive territory, suggesting that the decline was not enough to pull it into a negative trend. However, it remains below the signal line, a positive crossing of which would signal the resumption of bullish momentum.

Should the current pick-up in momentum be sustained on continued buying interest, the stock will be looking at a resistance of 61 sen, which represents its recent high.

A breach of this hurdle would signal the continuation of the ascending trend, while failure to do so could see the stock return to a consolidation channel.

To the lower end of the chart, the 50-day SMA is straddling a support level of 51 sen. A negative crossing of the support would suggest that sentiment for the stock has turned negative.

Further support can be found at 49.5 sen, which could offer a rebound before the 50-day moving average is convincingly breached.

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