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Straits Times 3,114.16 -11.98 -0.38%
Hang Seng 26,719.58 -128.91 -0.48%
Dow Jones 26,902.65 -123.23 -0.46%
Shanghai Composite 2,938.14 -39.19 -1.32%
Central Bank Meetings, Economic Data And Results To Shape This Coming Week
Perspective | 29 July 2013
By: Ernest Lim
Articles (134) Profile

Asia stocks were mixed as investors mulled over the latest 2Q US corporate results; weakness in China’s economy and speculation over when the Fed is going to start its bond tapering. (See Table 1 for the indices’ performance over the past two weeks)

Table 1: Indices’ Performance Over The Past Two Weeks

Source: Bloomberg; Ernest’s compilations

Two weeks ago, I mentioned that despite the S&P 500 having risen for seven consecutive days and closed at a new life time high at 1,680, it was not overbought yet. I further highlighted the bullish nature with the corresponding all time highs in both Dow Jones Industrial Average and Russell 2000 indices. S&P 500 indeed rose further and went to an intraday high of 1,699 and retreated from my previously mentioned resistance of 1,700.

Based on Chart 1 below, it is premature to call for a top, as most of the conditions for a top formation are not there yet. In addition, the trend is still up, unless S&P 500 dips below the rising trend line, currently at 1,644. For this week, the market direction is likely to be dominated by

a) Another wave of corporate results as 131 companies out of the S&P 500 are due to report results;

b) Federal Reserve, Bank of England & European Central bank meetings;

c) US monthly employment report to be out on 2 August.

Chart 1: S&P 500 – Still An Uptrend

Source: CIMB itrade complimentary chart (26 July 2013)

Hang Seng Index (HSI) consolidated around 21,205 to 21,536 for six trading days before surging past the resistance 21,741 to 21,832 and closed at 21,969. From Chart 2, it is evident that besides 21D exponential moving average (EMA), 50D EMA has started to inch up. The average directional index (ADX) has been falling and it is likely that the index may continue to consolidate around 21,535 to 22,290 in the near-term. Near-term significant support and resistance are at 21,741 and 22,151 respectively.

Chart 2: HSI – Likely Consolidatation In The Near-Term

Source: CIMB itrade complimentary chart (26 July 2013)

Two weeks ago, I mentioned that the near-term significant support and resistance were at 3,185 to 3,226 and 3,262 to 3,281 respectively. The Straits Times Index (STI) indeed touched an intraday low of 3,206 on 19 July 2013 and went to an intraday high of 3,278 on 24 July 2013 before closing at 3,236 on 26 July. Based on Chart 3, STI is likely to consolidate around the previously mentioned levels of 3,185 to 3,300 amid the low ADX of around 17.8 (indicative of a range trading nature).

Chart 3: STI – Likely To Consolidate Around 3,185 To 3,300

Source: CIMB itrade complimentary chart (26 July 2013)

Two Companies To Highlight:

1. Nam Cheong
With reference to my writeup on Nam Cheong, I mentioned that Nam Cheong has traded in a seven month range from $0.240 to $0.290. It has been testing $0.280 recently and it is likely that the more times it tests $0.280, the more likely it can breach past $0.280. The next resistance is seen at $0.290. I also wrote that for stocks which trade within a range, it typically takes some good news (perhaps in the form of contract wins; good results etc) to propel them higher.

On 23 July, Nam Cheong announced sale contracts for its vessels which saw its share price breach $0.280 to rise to $0.290 on strong volumes. It closed at $0.280 on 26 July. Based on Nam Cheong’s chart, the odds of staging an upside breakout outweigh that of a downside break down.

If it breaches $0.290 with volume expansion, an eventual technical measured target price is around $0.340.

Chart 4: Nam Cheong – Trading In A 7-Month Range $0.240 To $0.290

Source: CIMB itrade complimentary chart (26 July 2013)

2. Overseas Education
Overseas Education has been range trading between $0.675 to $0.750 since 20 March. On 26 July, Overseas Education staged an upside breakout from its four month trading range and shot up as much as 10.2 percent to $0.810. It closed at $0.785 for the day with a day range of $0.745 to $0.810. It has breached the critical resistance at $0.750 with volume of 2.5 million shares on 26 July. This was the highest volume in approximately two months. It has reached my near term technical target of $0.775 to $0.800. Based on Chart 5, the eventual measured technical target is around $0.820.

Chart 5: Overseas Education – Breaks Out From A 4-Month Range $0.675 To $0.750

Source: CIMB itrade complimentary chart (26 July 2013)

Please note that the above is my personal opinion and may not cater to your specific risk profile etc. The question of when to buy / sell and what to buy / sell differs greatly from individual to individual. Furthermore, it is extremely important to bear in mind that the market outlook is never static. It can change suddenly if there are sudden big events unfolding from the market – some events can happen as quickly as a few hours.

STI Supports And Resistances Are:

Current: 3,236.10

Support 1: 3,229

Support 2: 3,218

Support 3: 3,200-3,202

Support 4: 3,185

Resistance 1: 3,259-3,266

Resistance 2: 3,281

Resistance 3: 3,300-3,304

Resistance 4: 3,313

*Supports and resistances are not static levels. They may be subject to change daily.

*Summary Of Economic Calendar For The Week Ahead (SIN time)

29 Jul, Mon: (JPY) Retail Sales; (USD) Pending Home Sales;

30 Jul, Tues: (JPY) BOJ Gov Kuroda Speaks; (EUR) Spanish Flash GDP q/q; (USD) S&P/CS Composite-20 HPI y/y / CB Consumer Confidence;

31 Jul, Wed: (EUR) German Retail Sales / Unemployment Rate; (USD) ADP Non-Farm Employment Change / Advance GDP q/q / Chicago PMI / Crude Oil Inventories / FOMC Statement;

1 Aug, Thurs: (CNY) Manufacturing PMI / HSBC Final Manufacturing PMI; (GBP) Manufacturing PMI / BOE Meeting; (EUR) Spanish, Italian and Europe Manufacturing PMI / ECB Meeting; (USD) Unemployment Claims / ISM Manufacturing PMI;

2 Aug, Fri: (GBP) Construction PMI; (USD) Non-Farm Employment Change / Unemployment Rate / Personal Income & Spending / Factory Orders / FOMC Member Bullard Speaks;

3 Aug, Sat: (CNY) Non Manufacturing PMI;

*All economic data especially China data (if any) are subject to changes without notice. The above list is not exhaustive. I have merely listed the economic data which I feel has more impact to the market.

Information sources: Various sources such as Bloomberg, Daily FX, Dow Jones, Forex calendar, Zacks Investment Research, Reuters, SGX, Yahoo Finance, and Business Times etc.

P.S: The above is part of a bi-weekly newsflash which I send out to my clients on a weekend.

All the best for your investment and trading!

Disclaimer
The information contained herein is the writer’s personal opinion and is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided herein do not constitute an investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before making a commitment to purchase or invest in the investment product(s) mentioned herein. In the event that you choose not to do so, you should consider whether the investment product(s) mentioned herein are suitable for you. The writer will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials appended herein. The information and/or materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.
Ernest Lim is a CFA, CA and has worked at GIC Special Investment. He has a solid feel of the markets and financial world and is now a remisier.

Please click here for more information about this author.


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