Sapcres may have a bullish breakout

Sapcres broke above the line connecting its high for the past 8 years at RM4.10 this morning. On the daily chart, it looks like a breakout looks above a 'rising wedge' formation (see Chart 1). The volume is still moderate & not very convincing. If this breakout is the real deal, it could be the start of a big rally for this stock.

From the monthly chart below (Chart 2), we can see that the last time Sapcres had a bullish breakout (above its downtrend line, either R1-R1 or R3-R3), it put in an upward move equivalent to the distance between the previous low to the breakout level (denoted as 'a'). If the current breakout morphs into a full-blown rally and Sapcres were to put in a rise equivalent to the distance between the recent low to the breakout level, Sapcres could potentially go as high as RM6.00-8.00. The tricky part is determining the breakout level? Did the stock breakout above the overhead line at RM4.10 (based on the line, RR) or RM2.80 (based on the line, R-R2)? I think we can put aside the problem of the potential target price for now. The more important question is whether Sapcres's bullish breakout is genuine. If it is, it is a trading BUY. Since the upside could be very rewarding, I believe we should have at least take a small position in this stock.


Chart 1: Sapcres's daily chart as at June 9, 2011_11.00am (Source: Quickcharts)


Chart 2: Sapcres's monthly chart as at June 9, 2011_plotted on log scale (Source: Tradesignum)