BUYING commodity-related stocks by targeting to ride on an industry uptrend can be a tricky affair. It can often be a case of futile chase which ended in one entering at a high yet unsustainable price.
The other extreme is to buy low – provided one has holding power – in anticipation of a price uptrend although nobody can foretell how long this may be.
Such is the challenge when one delves in precious metal counters Poh Kong Holdings Bhd and Tomei Consolidated Bhd which closely track the price of global bullion.
Poh Kong manufactures and retails jewellery in gold and gemstones while Tomei designs, manufactures and retails jewellery, and refines gold as well as silver.
In a technical highlight, Kenanga Research sees a glitter in the prospect of Poh Kong and Tomei as gold price which took a beating throughout June – driven by a surprisingly hawkish US Federal Reserve – has recently rebounded off the US$1,760 support level and broke above the 100 day-SMA, setting the ground for another rally.
Technically speaking, having fallen 32% from the peak of RM1.17 in May, Poh Kong has rebounded off a support of 79 sen at the turn of the month, according to analyst Lim Khai Xhiang in a technical update.
“Similarly for Tomei, after peaking at RM1.46 in early-June, its share price fell 37%, mirroring gold’s 8% drop in June.”
With the gold price rally gaining momentum ahead of the Fed’s June-minutes (to be released today), Kenanga Research believe the bullish momentum will spill-over onto Poh Kong, potentially driving the share price higher.
“Moving forward, with the Fed rate hike fears subsiding, given the above-consensus US unemployment rate and resurgence of new COVID variants in the US, gold may continue to gain upward momentum which we think may spill over onto Tomei’s share price.”
With the MACD showing signs of upward momentum, Kenanga Research expects Poh Kong’s share price too potentially challenge its resistance levels of 98 sen and RM1.05 while its stop loss is pegged at 76 sen.
“With the MACD and stochastic indicators are showing signs of waning downward momentum and strengthening upward momentum respectively, an anticipated upward movement in Tomei’s share price could potentially challenge our resistance levels of RM1.15 and RM1.24,” projected the research house. “We have pegged our stop loss at 88 sen.”
At 10.41am, Poh Kong was unchanged at 86.5 sen with 1.23 million shares traded, thus valuing the company at RM355 mil while Tomei was up 1 sen or 0.99% to RM1.02 with 2.02 million shares transacted, hence giving it a market capitalisation of RM141 mil. – July 7, 2021
