SUPPORTLINE by FONG MIN YUAN

EG Industries Bhd‘s share price perked up on Wednesday, confirming a halt to its recent downtrend. However, the daily price chart shows the stock in bearish mode as it remains trapped below a short-term descending trend line that began on Aug 20. The counter had arrived at a peak of 64 sen before embarking on a two-month decline that saw the share price bottom out at a low of 47.5 sen. Wednesday’s pick up in momentum saw the stock reach for an intra-day high of 50 se, but given the negative pressure overhead, it remains at risk of further losses. The momentum indicators are painting a more positive picture following the recent performance. The slow-stochastic momentum index shows rising momentum as the percent K oscillator made a positive crossing with the percent D oscillator, giving a “buy” signal at 37 points. The 14-day relative strength index has is pushing past the neutral level at 53 points. Meanwhile, the daily moving average convergence/divergence line is resting squarely on the signal, pending some slight increment in share price to nudge it across. A bullish break out of the current downtrend can bee seen with a breach of the 50-day simple moving average (SMA) at 52.5 sen. The crossing would serve as a convincing move out of the desending trend line. Once achieved, it remains to be seen if the stock can surpass the 200-day SMA overhead en route to a higher target of 55 sen overhead. A return to a negative trajectory would be a bearish indication for the stock. This suggests that the downtrend remains intact. Support for the counter remains at the recent low of 47.5 sen with nearby support at the 46.5 sen mark.

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

Note: This article first appeared in StarBiz Premium yesterday.