OCBC Alert - wait it comes below 5

Financials have been one of the weaker sectors dragging down the US markets recently. Locally, our 3 banks have not been able to outperform the STI either. With the reporting of FY084Q results kicking off next week, expect more weaknesses as more provisions are made for bad debts by banks in this detoriating economic environment.

OCBC is sitting precariously above a support channel and looks unlikely to stay above for much longer. A failure to rally strongly after breaking out of a downtrend channel last December reflects weakness in the counter. A below expectation results may just be the catalyst to jump-start another round of selling, eventually pushing it to as low as $4.

For those with SBL accounts, you may position yourself by shorting OCBC at about $5 and await the breakdown. Only a rally above $5.50 negates the bearish view but this appears to be an unlikely scenario now. You can also buy some put warrants to ride the bear. My recommendation is OCBCBk RBePW090403. Although $1++ appears expensive for a warrant, this is in fact the cheapest put on OCBC as it is trading at its intrinsic value. Thus, there's ZERO time decay for holding this warrant for the next 2 months.

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