The local market’s bellwether stock, DBS Group Holdings, has fallen below its 50-day moving average at $25.62. And, with its Jan 29 close of $25.18, DBS is also below a support range at the $25.30 to $25.40 area. Unfortunately, this minor breakdown was accompanied by rising volume, in particular on Jan 29 which was a black candle day.
Quarterly momentum had broken below its own 50-day moving average earlier. There could be some support at the psychological $25 level, failing which 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. 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. Whither DBS goes, there goes the local market.
Keppel Corp formed a long black candle with a shaven bottom as its price closed at the low of the session on Jan 29. The chart pattern suggests a downturn. 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. Volume surged on Jan 29, when the long black candle formed, suggesting that this represents supply selling. Another rally is unlikely to materialise for a few months.
SEE: Safer to err on the side of caution as STI's support appears precarious
See also: STI’s upside from breakout remains valid as risk-free rates fade, but stay watchful for FOMC
The Straits Times Index has gained relative strength against stocks such as DBS and Keppel Corp. Nonetheless, it has broken a minor support and appears poised to break below its 50-day moving average - currently at 2,881 - which had acted as a support line. The index’s next intermediate support appears at 2,795. Although quarterly momentum has not weakened significantly, short term indicators are in sharp retreat. The 21-day RSI is falling after a negative divergence with price, and stochastics has started to fall from the top end of its range. Meanwhile, ADX has started rising. The DIs are neutral but could turn negative if the STI falls further in the next two sessions. It could take a few months for the STI to stage a rally.
