Tech Charts: RRHI | Oct 7, 2021 | FirstMetroSec

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RRHI: Breaking out of an 8-month consolidation

  • Robinsons Retail Holdings, Inc. (RRHI) broke above its 8- month resistance of P57.90.
  • Should RRHI sustain its rally, the stock can retest its next resistance levels around P62.60 and P65.00.
  • Accumulating once RRHI pulls back to P57.50/P57.00. Set cut loss below P53.90.

Buy on Pullbacks
Target Price: 83.00

What Happened: Robinsons Retail Holdings, Inc. (RRHI) broke above its 8-month resistance of P57.90. RRHI’s recent rally is attributed to the government easing restrictions for restaurants and personal care establishments from 10% capacity to 20% in the National Capital Region.

Our View: Should RRHI sustain its rally, the stock can retest its next resistance levels around P62.60 and P65.00. It is worth taking note that the stock’s RSI is at a four-year high and its stochastic RSI has been trading over the 80 level, suggesting that the recent rally is too sharp, and the stock will likely pull back first before resuming its ascent. On a positive note, RRHI’s MACD has crossed above the signal line and continues to rally above the 0 levels. This implicates a breakout in play as the stock’s price is poised to further increase.

As for fundamentals, we have recently upgraded our view on RRHI to a BUY and raised our target price to P83.00 (see: “Grossly undervalued reopening winner”), we have pushed back our earnings expectations due to the fluid and slow unwinding of mobility curbs. Nonetheless, valuations are attractive. The stock currently trades at -2SD of its forward mean P/E and at nearly 1.0x F12 P/B – unwarranted given the stock’s strong balance sheet that remained unscathed despite its mall-based businesses taking the brunt of COVID-19 restrictions. Despite any signs of recovery, we highlight that the increasing momentum in vaccine rollout will allow the government to ease restrictions. RRHI is best positioned to leverage on the wallet share shift and return of mobility. In addition, RRHI has the resources to pull through this pandemic with its strong balance sheet.

Recommendation: Accumulating once RRHI pulls back to P57.50/P57.00. Set cut loss below P53.90. Take profit at around P62.60 and P65.00. For long-term investors, we have a target price of P83.00 (42% upside compared to recent close)

Technical Analysis

Analysis: Should RRHI sustain its rally, the stock can retest its next resistance levels around P62.60 and P65.00. It is worth taking note that the stock’s RSI is at a four-year high and its stochastic RSI has been trading over the 80 level, suggesting that the recent rally is too sharp, and the stock will likely pull back first before resuming its ascent. On a positive note, RRHI’s MACD has crossed above the signal line and continues to rally above the 0 levels. This implicates a breakout in play as the stock’s price is poised to further increase. Aside from this, in October 04, RRHI also rallied above its 200-day MA. This signals the start of a bullish period as RRHI has been trading below its 200-day MA levels since Jan-21.

Trading Plan: Accumulating once RRHI pulls back to P57.50/P57.00. Set cut loss below P53.90. Take profit at around P62.60 and P65.00.

SOURCEFirst Metro Securities
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