Fundamentally, the Covid-19 vaccines are proving effective. Travel could start up sooner than expected, perhaps by the end of this year. Airlines have cut capacity, some low cost carriers are struggling to survive. SIA could benefit, and equity markets always look ahead, months ahead.
Singapore Airlines (SIA) was the best performing stock in our portfolio (see Tong’s Portfolio), rising some 10% week-on-week during the period of Feb 26 to March 3. Technically, there are reasons for SIA’s price surge. Its share price broke out of a multi-month base formation in the last week of Feb, around Feb 24. At the same time, prices broke out of a six-times tested resistance, on a notable expansion in volume.
Quarterly momentum looks a trifle uncertain on the daily chart, but a clear positive divergence between price and annual momentum coupled with an upturn by annual momentum has developed, and this provided SIA with primary strength. In January 2020, SIA had broken down below $6.82 or thereabouts. The breakout on Feb 24 this year indicates a price target of just $5.63. Prices rarely rise in a straight line accelerated up move. It is more than likely that SIA retreats to end the week on March 5, lower than $5.21, perhaps to the roundophilic level of $5. However, prices are likely to continue rising to at least $5.63 initially, and possibly onwards to $6.82. The breakout level was at $4.50.
