BARAKAH Offshore Petroleum Bhd (code: 7251) looked to have hit bottom at 28.5 on Tuesday, which set the stage for a technical rebound and some price recovery.
A sudden surge in buying interest on Thursday and some follow-through buying on Friday lent confirmation of an uptrend, adding to hopes that the stock can break free of its descending pattern. It, however, has several difficult hurdles to overcome.
Looking at the daily price chart, there needs to be some sustained momentum for the bulls to find their way out of the deep end of things. At present, the simple moving average (SMA) lines have taken up overwhelmingly bearish postures and are exerting negative pressure on the counter.
At Friday’s intra-day high of 37.5 sen, the stock successfully breached the immediate hurdle in the form of the short-term descending trend line as well as the 50-day SMA at 37 sen. However, in finishing the day’s session below the line, the crossing remains tentative.
Surpassing the obstacle, the counter then has to find sufficient momentum to close the gap left behind on Dec 3, to draw itself closer to the 100-day SMA around the 42-sen mark.
A breach of that resistance would lead to a return to greener pastures for the bulls to roam, and a possible challenge of the uppermost 200-day SMA at 52 sen.
The technical indicators suggest optimism in the direction of the share price. The slow-stochastic momentum index rose out of the “oversold” area at midweek and continued to rise past 50 points.
The 14-day relative strength index is also rising rapidly, and shows healthy progress at 64 points.
Meanwhile, the daily moving average convergence/divergence histogram remains submerged in negative territory, but having given a “buy” signal, is facing north.
Should the buying interest lose steam, the counter will find support at its historical low of 28.5 sen, but can set a new bottom deeper into the doldrums.
The comments above do not represent a recommendation to buy or sell.