Thong Guan Industries Bhd (KLSE: TGUAN) Technical Analysis February 2020

Monthly Chart

The monthly chart of TGUAN shows that price is currently trading just above the 50 period moving average (MA50) which also roughly coincides with a potential long term support around the RM3.0 area (top most green line). Should prices fall below this, further support may be found around RM2.5 and then RM2.0

Resistance is seen around RM4.5/4.6 area (red line)

Weekly chart

The weekly chart shows several patterns that roughly match horizontal support and resistance areas.

The purple lines show the formation of an ascending triangle pattern on the back of an uptrend which is traditionally a bullish continuation pattern. As of February 2020, prices have breached the triangle.

A potential target price (TP) for an ascending triangle breakout can be deduced by extrapolating the length of the upswing leading to the triangle onto the point of breakout. The RM4.5 TP using this method coincides with the long term resistance area of RM4.5/4.6 (red line).

Another pattern that can be seen is a double bottom (blue lines) which when occurring in a downtrend may signal a trend reversal – which has transpired.

A breakout of the double bottom occurred around the RM3.0 area and a TP for this pattern may be deduced by extrapolating the base of the double bottom onto the point of breakout (blue arrows). The resulting RM4.0 area coincides with the base of the head and shoulders patterns (orange line), the breakdown of which heralded the big drop in 2018.

Daily chart

TGUANs daily chart shows that prices are in an uptrend which can be seen by the formation of successive higher-highs and higher-lows, and price movements above the MA50 and MA200, with the MA50 trending above the longer MA200 and both MAs sloping upwards.

Price has fallen several times to be rejected by the MA50. It is also currently trending near the top of the ascending triangle pattern which has become a resistance-turned-support line. The MA50 thus may be seen as a strong support line.

Earnings

TGUAN has been showing improving earnings for the past four quarters.

Dividend

TGUAN gives out an annual dividend, usually once a year in August of RM0.08. With the stock currently trading around RM3.8, this translates into a dividend yield of 2.1%.

Conclusion

Technical analysis shows that TGUAN share price is currently in an uptrend. It has recently broken out of an ascending triangle consolidation and may continue to towards a possible initial TP of around RM4.0. Successful breakout from this resistance may see prices move towards the next TP of around RM4.5.

Should the upmove fail, prices may find an initial support around the upper border of the ascending triangle around RM3.68. Failure of this support may see prices testing the MA50 support and then the RM3.0 and MA200 support.

Although its dividend is neither high nor growing, it may be an extra point of consideration for long term traders and investors who are considering this stock for a longer term hold.

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