Technically, the chart patterns of the local banks and iFAST Corp are pointing to further retreats. Among them, iFAST is the weakest, mainly technically, but also fundamentally. iFAST has formed multiple head-and-shoulder top formations, with the most recent breakdown occurring at around $6.23, indicating a downside of below $3. The breakdowns took place in January and March (highlighted in previous Right Timing columns), despite still-positive outlooks by some analysts and market observers.
Currently, iFAST’s share price is drifting lower, most probably on the way to its target of below $3. These declines are likely to be punctuated by temporary rebounds. At present, the rebounds are getting weaker. Eventually, the declines will get weaker and prices will be ready for stronger rebounds. That point is not at hand yet.
Most long-term investors have a soft spot for banks because of the way they have performed over the past 30 or so years. Even then, during this period of secular uptrends, there have been weeks and months of declines.
DBS Group Holdings’s chart shows that prices have fallen below a double-top like formation. This materialised in June, when prices breached $31 or thereabouts, indicating a downside objective of around $25. This sounds alarming. Bear in mind that chart pattern breakdowns and breakouts indicate potential. Markets can always change their mind.
However, the ambiguous positions of DBS’s medium-term indicators, which are trending progressively lower, and the positive divergences formed by the short-term indicators are likely to stymie the decline. Nonetheless, prices may continue to drift lower towards the price objective. During this move, there will be occasions when prices rebound. The 50-day moving average, currently at $31.46, acted as a support line during DBS’s uptrend, and is likely to act as a resistance line on the way down. The best sign of the start of a recovery could well be when prices move above the 50-day moving average.
United Overseas Bank’s (UOB) chart looks similar to DBS’s, breaking below a double top at $28.36 in June. This break sets a target of around $23. The 50-day moving average looks set to cross below the 200-day moving average at $28.73 on July 1. While UOB’s 50-day moving average has not been as good a support line as DBS’s 50-day, it will nonetheless pose resistance on the way down.
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On the oscillator front, medium-term indicators are moving progressively lower, but short-term indicators have started to display positive divergences with price. These positive divergences can continue till short-term indicators rise above their equilibrium line into positive territory when they would likely trigger a sustained recovery. The recovery above equilibrium is unlikely to materialise till perhaps the end of 3Q2022. In the meantime, UOB’s share price could head towards $23.
Oversea-Chinese Banking Corp’s (OCBC) chart pattern does not show a clear uptrend or downtrend as prices have moved within a range for the past six months. Currently, OCBC’s share price is showing superior relative strength compared to DBS and UOB. This may mean that traders have an opportunity to trade the stock.
For investors who have kept their powder dry, or who have benefited from a spate of recent privatisations, these declines, in particular by DBS and UOB, provide an opportunity to accumulate stock at lower levels.
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