Supportline by FONG MIN YUAN

ELSOFT Research Bhd made an advance past the 100-day simple moving average (SMA) yesterday on the back of a surge in buying interest. Trading volume rose to its highest in eleven months, suggesting that a strong buying lead had come into play. With this performance, the stock appears to be ending its correction phase to resume a recovery position. Over the mid-march to April period, the stock had formed a “V-shaped” recovery pattern to suggest sharply improving optimism over the counter. The counter came close to challenging the resistance of 74 sen on Wednesday, which represents its pre-correction peak, before retreating on profit-taking in the final hour of trading. Should buying interest in the counter continue to grow, the share price would breach the hurdle, which will signal an uptrend for the stock. Overhead the stock continues to face pressure from the 200-day SMA, which will offer resistance further afield. On the lower end of the chart, support can be found at 61 sen, coinciding with the 50-day SMA. A fall below this level would signal a negative to a consolidation channel. Below that, further support is found at 57.5 sen, which if breached would mark a resumption of the correction phase. On the technical charts, momentum is looking more bullish with the surge in share price being reflected in “buy” signals. The slow-stochastic momentum index is on the verge of giving a bullish signal as the per cent K oscillator approaches the percent D oscillator. The 14-day relative strength index is also pushing higher at 57 points and remains healthy below the overbought line. Meanwhile, the daily moving average convergence/divergence (MACD) line has is hovering just below the zero and signal lines. A further advance will take the MACD into positive territory and higher than the signal line, which would trigger a “buy” signal.

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