HOVID - Breaking Out From Consolidation Range (ext.OSK)

The firm close at above the RM0.25 resistance level on a “Long White” candle on Monday should see the stock continue with its upward movement since the 2010 low. The close at RM0.25 was the highest in almost 2 years on weekly basis. Despite the subsequent pullback from Tuesday’s intraday high of RM0.29, the breakout looks good as the share price has stayed above the broken resistance level for 4 days now.

Thus, a purchase can be made at the current level, with a stop loss at RM0.235, which is the low of the past 2 weeks. A more conservative trade may entail waiting until the price closes above the 2011 intraday high of RM0.27 before initiating position as that should confirm the change in the long term trend.

A firm upward momentum should see the stock close above RM0.25 today, with first target at RM0.325, a measured move based on the 2010 rally, also the low of 2007. A measured move based on the 9-month consolidation could even see the stock reach RM0.36, which represents a claw-back of 62% of the 2007-2010 drop. A close below RM0.235 is likely to indicate a false breakout, especially with the weekly RSI near the overbought level. However, any weakness has to be confirmed by a close below the 2011 low of RM0.175.