Redtone’s share price may trade higher after the firmer move yesterday. The stock has reached our target of RM0.23, 3 months after we highlighted the possibility of an impending pullback following the failed test of the RM0.35 resistance. Buying support may have returned after the decline was halted at RM0.23, suggesting that the stock is trading within a huge sideways band of RM0.23-RM0.35. The higher close and the highest volume in more than a month points to the return of buying interest. But this will only be confirmed if the stock closes above the April-high of RM0.25. Positions can be initiated if this happens with a stop loss on close below RM0.23. The price target is RM0.30, which will claw back 50% of the 3-month decline. A strong move may even see the test of RM0.35. However, a failure to close above RM0.25 followed by a close below RM0.23 should see the stock trading lower – and perhaps, spell the end of the rally. Support is expected at the psychological RM0.20 and Aug/Sept 2011-low of RM0.15.
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