MULPHA International Bhd (Code: 3905) had undergone a two-year correction process amid persistent profit-taking selling pressure, starting from the third quarter of 2014 before bottoming out in the fourth quarter of 2016.
Soon, in the wake of renewed bargain hunting interest, this stock staged a rebound and made an attempt to break out of the downtrend, hitting a resistance of RM3.05 on March 13 this year.
Thereafter, Mulpha entered consolidation mode, precipitated by a gap down and negative crosses in the simple moving average (SMA) lines.
Based on the daily chart, this stock is still in consolidation mode, but there are, however, signs the counter is gathering momentum for a second attempt at breaking out of the downtrend.
Yesterday, Mulpha shares closed at a day’s high of RM2.65, and the stock can be seen heading upwards in the immediate term to fill the gap of RM2.80 that was left behind earlier this year.
Beyond that, the counter’s next hurdle lies at the recent peak of RM3.05, a successful penetration of which will see prices break out of its bearish medium-term pattern and rise out of the doldrums to the RM3.65 barrier.
Technically, turnover has been muted since the pullback from the recent peak in March this year. Hints of growing daily volume over the last few trading days, coupled with healthy indicators, could mean good things may be in store for this stock going forward.
The daily moving average convergence/divergence histogram has given a “buy” signal after spending the last two months hovering near the neutral line. Meanwhile, the slow daily stochastic momentum index has also pushed upwards into the near regions of the bullish area. In addtion, the 14-day relative strength index remains strong while tapering slightly in the overbought territory and the money flow index has been showing a healthy uptrend since the first half of October.
But, should investor interest fail to materialise over the next few days, the stock could pull back to the RM2.50 mark on profit-taking activity, where it is supported by the 14-day SMA. A more concrete support rests at the bottom-most 100-day SMA of RM2.35.
The comments above do not represent a recommendation to buy or sell.