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Straits Asia Resources Falls Below The Solid Structure
Trend Spotting | 28 October 2009
By: Xavier Lim
Articles (51) Profile

Weak support line. Straits Asia Resources (SAR) moved up after a gap down on 09 Oct-09, but was unable to maintain its uptrend due to investors’ pyschological impact that the damage on its new loading facilities at the Jembayan mine could hurt its production volume. As a result, SAR declined very quickly after hitting $2.10. We view that a near-term correction phase has emerged, and the breaching of the $1.95 support line (resistance-turned-support) supports our prediction.

Indicators show bearish signals. The 25-day and 60-day moving averages have already formed a bearish crossover on the day SAR hit $2.10. Our view is that the rebound of SAR is not going to happen in the near-term.

Initial key support at $1.60. We expect SAR to find initial support somewhere at $1.60. This should be a strong psychological support, a price where the negative news has been factored in by investors.

Range bound trading. SAR is likely to trade within the range of $1.95 and $1.60 over the next few weeks. However, any further negative news or poor market sentiment will cause SAR to form a head-and-shoulder formation.

Armed with an arsenal of investment knowledge, Xavier is the Senior Research Editor at Shares Investment.

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