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Friday, October 28, 2011

Gloves Sector (OSK)

Hartalega: Still Outperform. It is clear that Hartalega is outperforming the benchmark from its relative strength chart. Its relative strength line is making higher lows since December last year, and the line keeps moving higher even during the broad market Aug-Sep decline, largely due to its sideway market performance during that period. However, the same cannot be said of its price chart. Although the holding of the share price above the 10-month support line of RM5.35 is positive, weakness can be seen as it makes lower highs over the same period. A return of outperformance can be expected if it closes above the recent high of RM5.70, and a purchase can be made on such occurrence. The price target is RM6.50, a measured move based on the Dec 2010-Feb 2011 rally but expect resistance at the all-time high of RM6.00. A stop loss on the close below RM5.35 can be employed. Alternatively, purchase can be made just above RM5.35 on expectation of the support level holding. Should this level be broken, look for the price to test the support area of RM4.90-RM5.00.

Top Glove: Still Downtrend. On the other hand, Top Glove is clearly an underperformer, as shown by the relative strength chart. Its relative strength line is making lower highs, and made new lows even into October. Its share price is similarly weak, with the 200-day MAV line continuing to move lower and the price not recovering well from the one-year low made in September, in contrast to the broad market rebound since 26 Sept. However, the current positive market sentiment may push the stock higher if it can close above short-term resistance of RM4.25. A close below the psychological RM4.00 can be employed and the price target is the recent high of RM4.70 followed by the psychological RM5.00, where the 200-day MAV line lies. A break below RM4.00 could see the continuation of the downtrend with strong support expected at RM3.00, a measured move based on the Jul-Sep decline.

Supermax: Short-term uptrend. It is one of the stocks that have performed very well since the benchmark FBM KLCI rebounded in late-September. This is illustrated by the upward movement in the relative strength line in the past two months. The price moved higher after breaking the short-term RM2.50 resistance level as highlighted in the previous report. However, both the price and relative strength line are trending lower in the longer term, from the series of lower highs in the past year. Therefore, expect selling to come as the down move created plenty of resistance levels along the way. Resistance can be expected at prior lows of RM3.60, which is also the early-October high, and thereafter the psychological RM4.00. Minor resistance may also come at RM3.80, near the 200-day MAV and which retraces 62% of the Jan-Sep decline. A close above RM4.00 will break the series of lower highs and likely to change the longer-term trend up. The support is yesterday’s gap high of RM3.30.

Rubberex: Potential breakout. Similar to most of the glove makers, Rubberex’s share price is trending lower. It made a one-year low in October and the 200-day MAV line is moving lower. However, the share price has been moving higher, as shown by the upward slanting channel of the past three months. This “Flag?chart formation is usually viewed as bearish but the stock’s outperformance since early-September suggests otherwise. In fact, the break above the 2?month closing high of RM0.68 yesterday may lead to higher prices. The first target is the July-high of RM0.80, although it has to violate the 200-day MAV line first, now at RM0.73. Yesterday’s gap high of RM0.65 can be taken as a stop and a break below the “Flag?formation support line, however, may lead to lower prices. A break below RM0.56 confirms the downtrend and should see the price testing the 2008-low of RM0.50.

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