The US markets have rebounded from their end-Jan volatility and the S&P500 is at a new high. Ironically, the US markets rose when the likes of GameStop, AMC Entertainment Holdings, a cinema operator, and Express, a physical fashion retailer, dived.
The Straits Times Index has not followed New York higher. On the contrary, it’s hovering around 2,901 to 2,910, ending the first week of Feb at 2,907 (down 20 points week-on-week), and perilously close to its 50-day moving average, currently at 2,892. This moving average, in turn, rose three points from 2,881 a week ago. Unfortunately, quarterly momentum ended the week on a weak note, and is testing its own 50-day moving average.
Short term indicators remain weak, with the 21-day RSI trending progressively lower after a major negative divergence with the STI. Stochastics is also falling. The saving grace comes from the directional indicators where ADX is falling, and the DIs are neutral, suggesting the absence of downward momentum. Hence the STI is not likely to fall sharply, and may hold on to support at around 2,795 as it eases.
A weaker STI implies weaker component stocks including possible the banks, developers, REITs and the Jardine group. Rotational interested in situational stocks could keep investors and punters hooked on the local market. Singapore Press Holdings was kicked off the STI last year and replaced by Mapletree Industrial Trust.
From a chart pattern perspective, SPH is forming a multi-month base formation. And while prices were meandering sideways to lower, quarterly momentum was forming a series of positive divergences with price. In addition, prices have just moved slightly above the 200-day moving average at $1.19, and the 200-day moving average is flattening quickly. Prices have already moved above the 50- and 100-day moving averages and these are positively placed. The top of the multi-month base is at $1.25, which is also the closing high on Nov 20 and 24. Volume surged on Nov 20-24. To breakout, volume levels may need to be higher. If so, a successful breakout indicates a target of $1.60. At present, volume is low, and unable to support a breakout. But it may only be a matter of time before volumes builds up. In the meantime, the 200-day moving average may support prices.
Singapore Airlines is the local proxy to the vaccine in the absence of any locally listed vaccine producer, or a locally listed company that is involved heavily in the vaccines’ supply chains. At present, SIA’s share price is locked within a narrow range. The immediate resistance is at the flat 50-day moving average at $4.30. The range is likely to be narrow ahead of the year of the Ox, with support at $4.09. Volume has ebbed indicating minimal investor interest. On the other hand, stochastics is at the low end of its range and poised for an upturn, and 21-day RSI has turned up from the low end of its range. These indicators could support a rebound to $4.30. If so, volume could start expanding.
The Edge Singapore’s portfolio, that is highlighted on a weekly basis holds SIA shares, bought shortly after the rights issue in 2020.
