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Selective Stocks May Have Small Near Term Technical Rebound
Perspective | 23 March 2015
Related stocks:
U9E
5MM
T4B
By: Ernest Lim
Articles (134) Profile

Two weeks ago, I mentioned that markets are likely to take a breather in March and most of the indices have reached my near term measured technical levels.

Please refer to the technical analyses on the S&P500, Hang Seng, STI and FTSE ST Small Cap charts for more information.

Technical charts’ outlook

S&P500 Index
Two weeks ago (6 Mar), I mentioned that S&P500’s medium term trend continued to be up but the tapering of 21-day and 50-day exponential moving averages (“EMAs”) might indicate near term weakness.

This was indeed the case as S&P500 fell from 2,071 on 6 Mar to a low of 2,040 on 11 Mar which coincided closely with my second mentioned support of 2,042.

Subsequently, it rebounded and closed at 2,108 on last Friday.

Based on Chart 1 below, S&P500’s medium term trend continues to be up as depicted by its rising 100-day and 200-day EMAs.

It is noteworthy that 21-day and 50-day EMA seem to be drawing apart and rising (after converging) which is a positive sign.

S&P500 has been trading within the range 2,040 – 2,119 from 4 Feb to now.

An upside breakout above 2,119 points to an eventual measured technical target of 2,198.

This is an eventual potential technical target and may not be reached quickly even if S&P500 breaches 2,119, given the low ADX of 19.3 (basically unchanged from the 19.9 seen on 6 Mar.)

Near term supports are around 2,082 / 2,071. Resistances are at 2,115 – 2,125 / 2,150.

Chart 1: S&P500 bounced off from my mentioned support of around 2,042 and closed at 2,108

Source: CIMB itrade complimentary chart (20 Mar 15)

Hang Seng Index
Two weeks ago (6 Mar), I wrote that Hang Seng had closed below the bottom of the 1.5 month sideways trading range of 24,300 for two consecutive days.

A break below 24,300 on a sustained basis pointed to an eventual technical target of 23,600.

This was indeed the case as Hang Seng continued to weaken on 9 – 12 Mar and reached an intraday low of 23,677 on 12 Mar.

It bounced off from my mentioned measured target and closed strongly at 24,375.

Based on Chart 2 below, Hang Seng seems to be recovering from its recent drop from around 25,000 in late Feb.

21-day and 50-day EMA have converged and it would be good to see whether they can draw apart and rise in the next two weeks.

Given the low ADX of around 20.2, Hang Seng may not have the near term strength to breach its recent multi times tested resistance of 25,000 – 25,100.

In the next two weeks, Hang Seng is likely to trade within the range of 23,825 – 25,000.

Near term supports and resistances are at 24,257 – 24,289 / 24,104 and 24,500 / 24,700 respectively.

Chart 2: Hang Seng reached my measured technical target of around 23,600 before rebounding

Source: CIMB itrade complimentary chart (20 Mar 15)

Straits Times Index
Two weeks ago (6 Mar), I pointed out that although the STI medium term trend continued to be up, 21-day EMA had started to turn lower which might indicate that STI might approach the lower end of the trading range 3,375 – 3,445 in the near term.

This was indeed the case as STI fell from 3,418 on 6 Mar to an intraday low of 3,357 (very near to my previously mentioned support of 3,354) on 12 & 18 Mar before rebounding strongly to close at 3,412.

Based on Chart 3 below, it is reassuring that STI has managed to hold above its rising 100-day EMA around 3,360 for five consecutive sessions before closing strongly at 3,412.

STI’s medium term trend continues to be up as depicted by its EMAs.

Given the low ADX of around 16.2 on last Fri, STI may continue to be range bound 3,360 – 3,460 in the next two weeks.

See more information on STI supports and resistances below.

Chart 3: STI – fell indeed to near my mentioned support of 3,354 before rebounding to 3,412

Source: CIMB itrade complimentary chart (20 Mar 15)

*FTSE ST Small Cap Index (“FSTS”)
Two weeks ago (6 Mar), I pointed out that FSTS’ broke below the important support of 491 which pointed to a measured technical target of 475.

This materialised as FSTS fell from 485 on 6 Mar to an intraday low of 471 on 20 Mar before closing at 474.

The medium term trend continues to be bearish as illustrated by the break below the important support of 491; downwards trending EMAs and death crosses on the EMAs.

(See Chart 4.) RSI fell to a five month of 17.8 on 19 Mar before rebounding.

In the near term, FSTS may move higher but is likely to face stiff resistance at 480 & 491 – 493. Supports are at 470 / 467.

*I am still exploring the usefulness of analysing FSTS and whether it reflects actual trading opportunities or market sentiment.

Chart 4: FSTS’ reached my measured technical target of 475

Source: CIMB itrade complimentary chart (20 Mar 15)

U.S. Market Outlook
As mentioned two weeks ago, I wrote that markets are likely to be volatile due to speculation on the actual timing of the rate hikes.

However, historically, equities have typically performed well at the start of the rate hike cycle and investors can consider accumulating U.S. equities on pull backs.

On 19 Mar, Fed Chair Janet Yellen dropped the word “patient” from the FOMC statement but mentioned that it would tighten when “it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”

In the near term, I believe the overhang from the uncertainty over the FOMC meeting has been removed.

To a certain extent, this may be the reason for the recent strong U.S. equity price action.

Over the next few months, market watchers will be closely monitoring the U.S. economic reports, especially the jobs and inflation numbers.

The development over Greece will also be watched as markets will be looking to see whether Greece will be able to win an infusion of bailout money next week.

Singapore Market Outlook
Two weeks ago (6 Mar), I mentioned that I was bearish on the Singapore market with the weakness seen in FSTS and Hang Seng indices, and the lack of catalysts in March after the corporate results.

For the past two weeks, STI dropped 0.1 percent but FSTS tumbled 2.3 percent.

I also mentioned that I was likely to reduce my allocation to 30 – 60 percent but I might accumulate some stocks with developments / catalysts over the next 1 – 6 months on pullbacks.

For the past two weeks, I have increased my equity allocation to 71 percent as I accumulated some stocks on pullbacks.

I am likely to raise my overall exposure in the near term to approximately 100 percent (albeit temporary) to buy some battered down stocks on a trading basis.

Below are some stocks which are forming a base or have formed some potential bullish reversal signals.

Do note that they are shown on the basis of technical charts and readers are advised to do their own research on the fundamental aspects.

Chart alert 1: China Everbright formed a bullish hammer

After the 25 percent fall from an intraday high of $1.180 on 28 Jan, China Everbright seems to have formed a bullish hammer on 18 Mar.

On 19 Mar, it closed +0.02 to $0.885 on higher than average volume. On 20 Mar, China Everbright managed to close at $0.880, way off the low of $0.845 on high volumes. This is a potential reversal sign (i.e. bullish).

Near term supports and resistances are $0.860 / $0.835 – 0.845 and $0.900 / $0.935.

Based on Chart 5 below, even though the candlestick chart looks positive, it is unlikely that China Everbright can breach the multiple resistance levels between $0.975 – 0.990 in the next two weeks.

It is noteworthy that the bullish candlestick formation will be negated if China Everbright falls below $0.835 on a sustained basis with volume expansion.

Chart 5: China Everbright formed a bullish hammer

Source: CIMB itrade complimentary chart (20 Mar 15)

Chart alert 2: Resources Prima – bullish indicators

Resources Prima has fallen 40 percent from an intraday high of $0.139 on 28 Jan to close at $0.083 on last Friday.

Since 4 Mar, it has been trading within the range of $0.079 – $0.094. Indicators such as MACD and RSI have exhibited bullish divergences and both indicators seem to be strengthening.

Near term supports and resistances are $0.079 – $0.080 / $0.069 – 0.070 and $0.091 / $0.094 – 0.097.

It will be negative if Resources Prima falls below the multiple times tested supports around $0.079 – 0.080 on a sustained basis with volume expansion.

Chart 6: Resources Prima – bullish indicators

Source: CIMB itrade complimentary chart (20 Mar 15)

Chart alert 3: Sino Grandness building a base

Sino Grandness has tumbled 49% from the intraday highs of $0.515 on 28 Jan to close at $0.265 on last Friday.

Since 10 Mar, it has been trading between $0.235 – 0.290. Indicators such as RSI and MFI seem to be strengthening. MACD just did a bullish moving average crossover.

Near term supports and resistances are $0.260 / $0.250 and $0.275 / $0.300 – 0.305. It will be bearish if Sino Grandness falls below its recent low of $0.235 on a sustained basis with volume expansion.

*Side note: Sino Grandness has invited some analysts and shareholders to attend their annual Chengdu trade fair from 23 – 25 Mar.

Chart 7: Sino Grandness building a base

Source: CIMB itrade complimentary chart (20 Mar 15)

Please note that I am putting my equity allocation and selected stocks above just for general discussion purpose. Due to my work nature, I can change my equity allocation and the stocks quickly and without prior notice. Furthermore, I exercise an active approach in portfolio management with a relatively short horizon. Everybody is different in terms of returns expectations, risk profile, portfolio size, commitments, market outlook, stock preference etc. As such, everybody’s allocation in equities differs.

In addition, it is noteworthy 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 near term supports and resistances are:

Current: 3,412

Support 1: 3,394

Support 2: 3,386

Support 3: 3,357 – 3,360

Support 4: 3,339

Resistance 1: 3,425 – 3,430

Resistance 2: 3,445

Resistance 3: 3,455

Resistance 4: 3,465

P.S: Supports and resistances are not static levels. They may be subject to change daily.

**Summary of Economic Calendar for the Week ahead (SIN time)

23 Mar, Mon: (EUR) ECB President Draghi Speaks; (USD) Existing Home Sales / FOMC Member Fischer Speaks;

24 Mar, Tues: (CNY) HSBC Flash Manufacturing PMI; (EUR) French, Germany and Europe Flash Manufacturing & Services PMI; (USD) Core CPI m/m / Flash Manufacturing PMI / New Home Sales;

25 Mar, Wed: (EUR) German Ifo Business Climate; (USD) FOMC Member Evans Speaks / Core Durable Goods Orders m/m / Crude Oil Inventories;

26 Mar, Thurs: (GBP) Retail Sales m/m; (USD) Unemployment Claims / FOMC Member Lockhart Speak / Flash Services PMI;

27 Mar, Fri: (USD) Final GDP q/q / FOMC Member Fischer Speaks / Revised UoM Consumer Sentiment / Fed Chair Yellen Speaks;

**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.

→Please refer to Forex Factory Calendar for a more detailed / up to date list of economic events.

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

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.

China Everbright Water  0.315 -0.005 -1.56%   
Business: Co is involved in the environmental water business, including wastewater treatment, reusable water projects and wastewater heat pump projects in PRC.

Insight: Feb-19, FY18 revenue rose 33% mainly due to increa... Read More
Resources Prima Group  -- -- --   
Business: A mine owner and primarily engages in the business of coal exploration and coal mining in Indonesia.

Insight: May-19, 1Q19 revenue fell 83.7% to US$51,000 as EI... Read More
Sino Grandness Food Industry Group  0.044 -0.001 -2.22%   
Business: Integrated manufacturer & distributor of own-branded Garden Fresh juices as well as canned fruits & vegetables. [FY17 Turnover] Beverage (72.4%), canned pdts (27.6%).

Insight: Aug-18, 1H18 revenue jumped 10.6% to Rmb1.7b mainl... Read More


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