Thursday, February 17, 2011

DIALOG Trading Ideas - Facing Tough Resistant At RMRM2.25-2.30

Dialog is a leading integrated specialist technical service provider to the oil, gas and petrochemical industry. Its main income generators are:
(1) the distribution of base oil fluid for offshore drilling;
(2) catalyst handling;
(3) tank farms;
(4) plant maintenance; and
(5) EPCC.

At RM2.13, it is trading at 27x FY6/11 and 24x FY6/12 consensus P/Es, respectively based on Bloomberg.

After hitting 52-week high of RM2.29 on 11 Jan 2011, Dialog’s strong rally from 52-week low of RM2.00 appears to be stalling following several indecision candles in the form of dojis and spinning tops. The negative momentum and trend indicators in
the daily and weekly charts call for at least a short term pullback.

Besides, narrowing Bollinger bands are suggesting possible consolidation within the middle Bollinger band (RM2.12) and RM2.08 (30-d SMA) in the near term. There is also a possibility that it could even correct further towards RM2.00 (lower Bollinger band) if the 30-d SMA support is violated.

Although price could still make one more surge to test the RM2.29 level, sustainability is a key concern here. Hence, our strategy is to unload on strength near RM2.25 (upper Bollinger band) and RM2.29 zones. Subsequent resistance levels are
RM2.37 (upper Bollinger band-weekly chart).

Dialog Daily Chart: One more upleg to retest 52-week high of RM2.29
Dialog 17-02-2011

Dialog Weekly Chart: Increasingly Toppish
Dialog 17-02-2011a

Source: HLebroking

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