Ironically, global markets, in particular US equity markets, appear to be inversely proportional to the “retail Reddit” stocks such as GameStop; AMC Entertainment Holdings, a cinema operator; and Express, a physical fashion retailer. These are the socalled old economy stocks which surged with the help of social media. Retail investors in particular should note that MUST Asset Management, a Korean-based fund manager that used to own 4.7% of GameStop sold all its shares following the surge last month, as announced in a filing on Jan 28.
The charts of these three stocks show spike-like accelerated upmoves followed by collapses. The trio are — GameStop, AMC and Express — are likely to find some sort of a floor from their precipitous declines. They are then likely to move sideways, within narrow ranges, probably losing strength against the broad market.
With volatility in global markets receding, the Straits Times Index (STI), currently at 2,901, managed to hold at its 50-day moving average, currently at 2,892, up from 2,881 a week ago. The index had fallen below a minor support at 2,977 on Jan 25, and this level should act as resistance in the event of rebounds. The next support for the STI, should it fall through 2,892, is at 2,795. If prices fall towards this level, they would fall below the 50-day moving average, signaling danger for the component stocks. The 50-day moving average has acted as a support line for the index and if breached is likely to act as a resistance line.
Short-term indicators remain weak, with 21-day RSI trending progressively lower after a major negative divergence with the STI. Stochastics are 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. Quarterly momentum maintains its uptrend, and that too may limit a downmove.
DBS Group Holdings broke below its 50- day moving average — currently at $25.65- and in doing so also fell below its short term support at $25.30 to $25.40. Its share price is now attempting to build on to support at $24.80. If this is breached, the next important support appears at $22.72, at the bottom of a runaway gap. The top of the runaway gap is at $23.80, but it represents only the shadow of a candlestick and would be a weak support. Volume has dwindled, suggesting that supply-selling may have abated for the time being. Nonetheless, quarterly momentum is weak following a minor negative divergence with price, and it has fallen below its own support. The stock’s closing high this year was $27.42 and this was also the one-year high. It could be weeks, perhaps months before prices are able to move towards this level.
Keppel Corp rebounded from an intra-day low of $4.81 on Feb 1. Prior to that it had formed a long black candle which started at $5.42, and ended at $5.01. The volume during the formation of the black candle was the highest since August 2020. Hence the black candle is likely to pose resistance. Evident in the chart is the negative divergence between price and its quarterly momentum. As a result prices may continue to ease towards the $4.50 area before they start ambling sideways. Temporary rebounds aside, a strong rally is unlikely to materialise for a few months.
