After its impressive >33% rally from recent S$8.07 low, UOB could be facing more near-term downside risk, especially if it fails to hold above S$10.32 (38.2% Fibonacci retracement of the fall from S$13.98 to S$8.07).
Daily RSI indicator shows that the stock is currently overbought ? the last time it went into the overbought region was in Aug 08 and stayed there for only three sessions before it went into a freefall from S$20 to S$10.40 over a span of two months.
Coupled with a bearish engulfing candlestick formation on Friday, there is a good chance that the stock would correct to fill the gap at S$9.79-9.92.
But we think that the real test would be at S$9.25 (centre line of the Bollinger Band); failure to hold above the line could see the stock revisiting the recent S$8.07 low.
However, the chance of that happening looks remote as the weekly charts remain relatively positive ? UOB managed to form a bullish hammer at S$8.07; weekly MACD has just turned upwards and weekly RSI has just risen out of the oversold region.
On the upside, we expect a pretty stiff resistance at S$10.47-10.54 (50-day moving average and upper Bollinger Band), ahead of S$11.02 (50% retracement).
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