Periodically, TCB will pick a stock we may like to trade short term. So, this week, TCB have picked the stock, DSONIC to put in *Stock In Focus (SIF)*. Please do not take this as a buy signal as our TA reading for these stocks are for sharing purposes only. Do calculate your own risk/reward ratio if you decided to trade this counter.
For this edition of SIF, we have featured a stock linked to one of current stock themes in play, namely, the GST and Petrol Subsidy theme. Although, presently, it may not be fully ready for a breakout from a TA perspective, we nevertheless opine that it is a stock worth watching out for. As with all stocks, it does carry some trading risks.
-- Dsonic: Daily Chart --
Since hitting a high of 2.425 on 1/4/2014, Dsonic underwent a 2 weeks correction that took it all the way down to 1.295, a 50% retracement. It was traded up again to the high of 2.06 in June 2014 and subsequently churned out a double top formation which broke down in Sept. 2014. The bearish formation sent its prices down when it achieved its break down target of about 1.44, approximately a 78.6% retracement, on 8/10 and potentially could be rebounding off this retracement level.
-- Dsonic: Daily Chart --
On 21/10, it formed an engulfing bear during the downtrend which may have the implication of a last engulfing bottom. Currently, momentum on the stock is gaining as suggested by the up trending RSI while the trading pattern has a hint of an inverted head and shoulder formation in progress which has bullish implications if a break out occurs. The stock has an immediate support at 1.56 which if broken will have further support back at 1.49 and 1.44 respectively. For short term traders, a stop loss of 1.43 is recommended while for mid-term traders the recommended stop loss is 1.29.
In order for it to pursue a breakout, it first needs to take out its immediate resistance at 1.64. Further resistance awaits it at 1.72 which if broken will see it testing the strong resistance of 1.82. A successful break in 1.82 with volume will be a break out from the downtrend line and confirms the bullish trend reversal.
Key Notes:
- Dsonic is heavily linked to the implementation of the petrol subsidy which represents a potential catalyst to the upward movement of the stock.
