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SingTel Breaks Away From Consolidation Trends Down
Trend Spotting | 11 December 2013
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By: Nicholas Tan
Articles (71) Profile

The strength of the Singapore dollar against the Aussie (in which the bulk of Singapore Telecommunication’s (SingTel) revenue is denominated) as well as emerging markets’ currencies such as the Indonesian rupiah and Indian rupee, has in recent times caused a drag on the telecommunication company’s (telco) financial performance.

In the local market, the telco is facing stiff competition amidst an already saturated market as mobile phone penetration rate has hit 151.8 percent in 2012, according to the Infocomm Development Authority of Singapore. Thus, we see that SingTel is looking towards making transformative plans by engaging in acquisitions to diversify revenue stream and enhancing productivity to attain margin expansion.

Displayed above is a one-year daily chart of SingTel, which does not look too bullish lately and appears to be on a downtrend after reaching its all-time high of $4.09 on 20 May, as indicated by the red cluster.

Since mid-September, SingTel has been trading in sideways consolidation between the range bound of $3.67 to $3.83 and near its 20- and 50-days moving averages (MA), as indicated by the purple cluster, after twice failing to break its previous peaks.

The stock traded between the 61.8 percent and 38.2 percent Fibonacci retracement levels, and tested $3.83 (the high of the descending triangle) but failed to break through.

From the chart, we can see that the counter recently broke away from a descending triangle pattern by closing at $3.61 on 6 December, which was accompanied with higher than average volume (24.3 million) on the breakout (30-days average volume was 16.2 million). The break out indicates weakness in the stock price and a continuation of the downtrend.

This is further supported by the fact that the faster 20-days MA crossover the slower 50-days MA from the top, indicating a bearish signal for the counter in the short-term. The relative strength index also merely touched the “over-sold” lines three times but failed to clearly breach it as displayed by the yellow cluster, indicating possible further weakness.

Next, the stock is likely to test the 23.6 percent Fibonacci retracement level at $3.58. If this is broken, it is likely to head to test the support at $3.50. Hence, we recommend a short-position entry with a short-term target price of $3.50 and a cut-loss order at $3.65, representing the bottom of the descending triangle. If the short-term target price is breached, the next price target would be the September low at $3.42.

Well trained in aspects of finance and business, Nicholas oversees the finance and manufacturing sectors at Shares Investment.

Please click here for more information about this author.

Singtel  3.200 -0.01 -0.31%   
Business: Asia's leading communications group. [FY19 Turnover] Mobile Comm (31.1%), Data & Internet (19.2%), Infocomm Technology (17.5%), Sale of Eqmt (16.5%), Digital Biz (7.2%), Fixed Voice (5.2%), Pay-TV (2.1%), Leasing (0.8%), others (0.4%).

Insight: May-19, FY19 operating revenue remained flat at $1... Read More


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