Eye On Stock

EG INDUSTRIES Bhd (code: 8907) bounced higher yesterday, putting an end to the correction phase that had begun in mid-november.

The strength of the bounce was significant as the share price rose above the key simple moving averages (SMA) in intra-day trading to signal a return of bullish sentiment. However, by market close, the stock closed only slightly improved at 42 sen.

Further sessions of gains would be needed to reverse the falling angle of the 14- and 21-day SMAS, signaling a brighter short-term trend.

This recent advance came just days after the 50-day SMA crossed above the 200-day SMA in a “golden crossing”, which indicates the resumption of a bullish outlook on the daily price chart.

At its current upward trajectory, the stock could attempt to reach above 43 sen, which currently coincides with the 50-day SMA.

Above that, it would target the recent high of 46 sen, and attempt to breach the shortterm SMAS. The stock will continue to see resistance en route to 52 sen as it makes its way higher.

Below that, the 100-day SMA is hovering near the stock’s recent low of 40.5 sen, which serves as support. A negative crossing of this point could be a signal for investors to head for the exit.

Looking at the technical indicators, a more positive outlook is forming over the horizon. The slow-stochastic momentum index has crossed into a “buy” signal and is making its way higher at 27 points.

The 14-day relative strength index reflects this growing momentum, on the brink of returning from oversold conditions at 28 points.

However, the daily moving average convergence/divergence line has slipped into negative territory on the back of the correction phase that recently took place.

Further advances in the share price will turn the trajectory of the MACD line higher, targeting the zero line, which would signal the return of a positive trend.

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