Watchlist: Utama Banking Group - Bullish Flag

Utama Banking Group is forming a bullish Flag pattern in its daily chart. Prices first moved up on 19 June & then formed a tight, flat Flag bet 19 & 27 June. It then moved up very strongly with high volume on 27 June with a positive breakout from that first flag. This is mainly due to EPF's buyout proposal for Utama's 32% share in RHB which indirectly owns RHB Bank.

Following that breakout, it has started to consolidate on lower volume forming a new Flag. Lower volume on flag formation is confirmation of the Flag pattern formation. The measurement of the upside is the size of the flag pole beginning on 26 June (0.785) to the top of the pole on 29 June (1.08) giving a difference of 0.295. So when prices break out of the Flag, it should rise by at least 0.295. Assuming a breakout at 1.00, that will bring prices up to approx 1.295 which is close to its second resistance level of 1.28 in the long term chart above. It could possibly rise to 1.37. So Target Price is 1.28 or if buying is strong 1.37.

Gains can therefore reach between 28 & 37%.

However as always for a Flag, the important point is the breakout from the Flag accompanied by high volume as happened with the breakout on 27 June.

As the interest in Utama & RHB is still high with rumours of a foreign bank (Bank of Nova Scotia) joining EPF in its bid for RHB, chances are good that we will see a breakout soon.

Keep an eye on this stock & watch for a breakout from the flag.