SIA has been battled badly due to swine flu. However, we thinkthe support level at 11.60 is a strong one while no major resistances exist. The risk-to-reward is in favor to accumulate the stock at this moment. We have a technical BUY of 12.28.
Over the past few days, SIA has underperformed the STI index considerably due mainly to the fear of the negative impacts brought by swine flu on aviation sector. The flu alert in Singapore was lowered, but SIA continues to trade lower.
SIA has retraced almost 50% of the recent upswing (from 9.30 to 13.22).
We believe the support at 11.60 is a strong one, as evidenced by the confluence of support level defined by the peak on 9th April 2009 and the Fibonacci retracement.
RSI attempts to cross its corresponding 14-period moving average. The declining momentum has slowed down and signifies that a change in trend is about to ensue.
Interaction between volume and share price reflects the psychology of mass investors. The moving average of the volume shown in rectangle resembles a bell curve, a typical cycle for a buying interest. The decline in SIA was not coupled with strong selling pressure, indicating most investors are not dumping the share.
Buying interest will be easy to form at this juncture. We just need a few innovators to initiate a buying wave, the strong upswing will follow.
We think the entry risk is low given that SIA is trading near to MIDAS.
If the support of 11.60 to be broken convincingly, albeit unlikely, a continuation of the current downtrend may occur.
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