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Friday, December 2, 2011

BONIA - 1-year Resistance Broken (OSK)

The market has finally turned its attention to Bonia. This stock is actually on an uptrend since hitting a low in early 2009. The rally peaked in Oct 2010 and the stock has been consolidating the rise since then. It traded for almost a year between the support level of RM1.65 and resistance of RM1.90. In fact, the consolidation has a bearish bias from the lower highs as the sideways trend progressed, which culminated in the break below RM1.65 during the start of global market rout in August.

Follow through buying even saw the violation of its 1-yr resistance level. A close above RM1.90 this Friday should confirm the continuation of the uptrend. Note that the weekly RSI is barely overbought and leaving plenty of room for higher prices, which could potentially set the stage for a rerun of the 2010 rally. Purchase can be made at current prices or if possible, on retracement towards the broken 3-month resistance level of RM1.72, which also can be employed as a stop. The price target is RM2.60, a measured move based on the 2009-2010 rally, with resistance expected at the all-time high of RM2.40. A break below RM1.72, with a confirmation of a close below RM1.60, could see it falling on its own weight. This could potentially lead to a gradual price decline on low trading volumes, which was seen in 2Q–3Q of 2011.

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