Since the announcement of possible cancellation of orders for KepCorp, the stock price has fallen to an intra-day low of $3.73 and maintained in a narrow range of between $3.70 to $3.90. Potentially, it could be building a base around the $3.80 level as suggested by the Stochastic indicator. The Stochastic signals lying in the oversold region starting to get flattish and coupled with the RSI also flattish around the 30% level, there lack strength in short-term rebound. The DI pair still negatively spaced and no sign of convergence indicating no immediate rebound in the price level. This all point to a possible base building formation in term for the year end rally. Downside at the moment would be the intra-day low of $3.35 on 28th Oct 08 and if year end rally does materialize and KepCorp is one of the blue chip in for the rally, the upside target could be around the $5.63 level. With a downside risk at $3.35 and upside target around the $5.60 level, the risk to rewards ratio is very attractive. Investors/traders who believe in the year end rally could strategically open a long position around the $3.80 level and if sudden capitulation does occur, could open another long position.
