SINGAPORE (Sept 15): Here are some charts for our technical analysis.
Straits Times Index (daily)
The Straits Times Index (3,209), fell 28 points during the week, and continued to weaken. Prices remained below the below the 100-day moving average (currently at 3,250). Both the 50- and 100-day moving averages which had been rising for the past 10 months, are flattening.
Quarterly momentum has broken below its equilibrium line, confirming that the STI is likely to trade on an all-round weaker tone. Negative divergences have also developed between annual momentum and the index, lending further weight to a possible market turn.
Apart from stochastics, short term indicators are not sufficiently oversold to trigger a good rally. However, the STI could stage a temporary rebound on an upturn by stochastics. The index needs to regain 3,250 to be able to stage a more meaningful rally. ADX is rising, and the DIs are negatively placed.
Possible downside
A deeper correction had already been indicated when the STI was unable to hold above a relatively strong support area at 3,265-3,270. The next important support appears near current levels, at the 3,200 to 3,208 range. Prices could bounce off this level to complete a top formation. A break below 3,200 indicates a downside of 3,050.
Hot and lukewarm stocks
Mandarin Oriental International (US$2.56) situational surge
Prices rose more than 20% to US$2.56 on Sept 15, making this one of the top gainers and a hot stock in the market. On June 5 this year, Mandarin Oriental announced it was undertaking a “review of its long-term strategic options with regard to The Excelsior, Hong Kong”.
As part of that review the Company had decided to test market interest in the possible sale of the property. On Sept 15, the company announced that it has received proposals from potential purchasers. Mandarin Oriental is 77% held by Jardine Matheson Holdings.
Yangzijiang Shipbuilding ($1.42) still struggling
Prices are struggling to hang on to the rising 50-day moving average, currently at $1.44. The counter attempted to move above this level, to $1.45 but closed its low on Sept 15. Quarterly momentum continues to move progressively lower.
The 21-day RSI appears poised to break below its equilibrium line. ADX is falling, and the DIs are neutral. At their high, prices had more than doubled, and they are still up 80% since the start of the year. Yet, the technical outlook has deteriorated. Support/ breakdown is at $1.29. Current moves are likely to be part of a top formation where the indicators are giving advance warning of weakness. Annual momentum, however, remains intact for the time being.
