Tuesday, June 30, 2009

STI climb back to 2350-2400 level in coming weeks rather than fall to next 2130-60 support area

Odds on fundamental front favour market to climb back to 2350-2400 level in coming weeks rather than fall to next 2130-60 support area

Given the 2 strong breakouts on near record volumes in May which quickly demolished the 2130-60 multi year resistance and the valiant attempts to keep to the gains made all the way to 2400 earlier this month, the odds suggest that it would not be easy to bring down the market to below 2200.

STI is in middle of 2 key historic levels ie 2130-2160 and 2350-2400 asplayers weigh the risk of test of the former or return to recent highs. The current 2240-2280 trading band itself is another key historic level, providing support.

Turnovers have been much reduced in the past week or so as the index pulled back 188 points or 7.8% from 2425 to 2237 low at yesterday’s close, at the higher end of the 3.7% to 8.3% pullbacks seen soon after the March 10 bottom at 1455.

The market needs some new leads to return to 2350-2400 and apart from mid-year window dressing which should underpin the index to atleast around 2250-2300, there should be some clues as to the 2q earnings performances in the next 2-3 weeks before the all-too-often earnings watch season kicks in later in July.

We have also seen positive earnings upgrades as well as more bullish views on possibility of a V-shaped recovery but the extent of the market pricing in these unexpected changes in fundamentals which were unthinkable in 1q09, can be read in its behaviour in the July-Sept period.

If the economy which most agree has bottomed out in 1q09 together with the worst on the earnings front also behind us, definitely been factored in by the March-May surge, continue to recover bringing down 2009 GDP contraction to below -5% vs official -6% to -9% forecast, then the index rise to 2400 would have been justified.

Thus when preliminary 2q GDP numbers are announced around 9 to 14 July, there could be clearer signals that second half GDP performance would justify a significant lowering of 2009 contraction to -3 to -5%. But officially this may be known only around National Day.
Having surged 970 points, exactly two-thirds from 1455 to 2425 to early June, and recovered to the key 38.2% Fibonacci mark (2363) of crash from 3831, there should at least be another attempt to test and break 2425.

It is however unlikely that it would be a breeze but in the event there is a rally to next historic resistance ie 2480-2500 by August, players should get out first as the Aug-Oct period is notorious for market corrections or even crashes.

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Dow and S&P500 technical chart view

Dow Jones Industrial Average: Consolidation expected by virtue of triangle formation

Performing as anticipated. We have previously wrote that we were expecting Wave 4 to drag the Dow Jones Industrial Average (INDU Index) to lower ground with support seen at the 8,165 – 8,246. Our forecasts turned out to be rather inline, given that the index lost more than 4% in a fortnight and attained a trading low of 8,259 which was just slightly above our support level.

Range trading expected. However, given the muted participation as evidenced by the decline in trading volume during the 361-point retreat in the Dow for the last two weeks, we believe that a 5-Wave Triangle pattern within the present Wave 4 is in the making. This indicates that the Dow may consolidate, further evidenced by the bollinger bands that have stopped expanding.

Key levels to note. The Dow is forecasted to bounce within the quoted resistance and support levels with its trading range expected to contract further in the short-term. Resistance is identified at the 8,877 – 8,928 area, courtesy of the 100% fibonacci extension of Wave 1 and the upper bollinger band. On the other hand, support is positioned at the 8,221 – 8,259 region by virtue of the lower bollinger band and a series of daily lows.


S&P 500 Index: Range trading expected

Expected to turn in a performance similar to the Dow. We have previously mentioned that the move above the 100% fibonacci extension of Wave 1 at the 945 mark by the S&P 500 (SPX Index) had represented a false breakout as the latter eventually lost 28 points in a span of two weeks. We had also written that the S&P is expected to resume its usual trend of trading inline with the Dow – this view remains.

Consolidation in the pipeline. The 5-Wave Triangle pattern seen in the Dow is also expected to occur for the S&P as well while the bollinger bands similarly cease expansion. With the S&P forecasted to consolidate, resistance is identified at the 956 – 960 area as represented by the tip of Wave 3 and the upper bollinger band. Meanwhile, support is located at the 888 – 892 range as outlined by the lower bollinger band.

Monday, June 29, 2009

Biosensors - Tweezers bottom reversal at key support suggests further upside

Biosensors is likely to see more upside in the days ahead following the formation of a tweezers bottom reversal pattern at the lower boundary of its 8-month uptrend channel and key resistance-turned support level of $0.46.

With the RSI staging a sharp bullish reversal to jump out of the oversold region and the Stochastic indicator also on the verge of doing so, coupled with the OBV indicator rebounding off its 6-month uptrend line again, they suggest that the upside momentum could be building up again.

We expect the rebound to meet an initial resistance at $0.515 (support- turned-resistance level), breaking which, the next key resistance is at $0.585 (2009 high and upper boundary of 8-month uptrend channel)

Below the immediate support of $0.46, the subsequent support is at $0.42 (resistance-turned-support level).

Genting take proft as already rebounded to 0.71


Genting SP=$0.71 (Rebound to yellowline hit.......take profit)

Watch out for 30 June USDA report – soy planting is expected to be significantly higher

Year-to-date, palm oil prices have peaked at RM2,880/tonne (t) in mid-May to current levels of about RM2,300/t.

Negatives for vegetable oil prices: 1) Germany will cut 2009 biodiesel blending target to 5.25% from 6.25% originally intended; 2) speakers in 2009 Indonesia Palm Oil Conference expect palm oil prices to decline to US$550-600/t; 3) vegetable oil inventories at Indian ports hit an all-time high; and 4) 30 June USDA report on actual soy plantings will show a higher area than the intentions report.

Positive for vegetable oil prices is Oil World projects the stock-to-use ratio for global 17 oils and fats will decline to 10.3% in the 2009/10 season versus 10.4% in the current 2008/09 season.

We remain bearish on palm oil, as we expect supply to recover (reversal of tree stress, seasonally high production) while exports to wane (exports to India unsustainable, restocking is over). Maintain UNDERWEIGHT on Malaysian palm oil stocks and OVERWEIGHT on Indonesian palm oil players. El Nino is the wild card.

Friday, June 26, 2009

Candidates for technical rebound? Biosensors, Raffles Education, Straits Asia, AusGroup, Genting


Biosensors=$0.48 (Another candidate for technical rebound?)


RafflesEdu=$0.565 (Candidate for technical rebound?)


StraitsAsia=1.73 (Correction from high of $1.96 on 12 Jun, potential candidate for a technical rebound)


AusGroup=$0.55 (Potential candidate for a rebound to yellowline at $0.58)


Genting SP=$0.68 (Yellowline at $0.71)

ComfortDelGro - Strong rebound suggests more near-term upside

- ComfortDelgro could climb higher in the days ahead after staging a fairly strong rebound from the $1.26 key support – one that provided the base for 3 previous rebounds.

- With both the RSI and Stochastic indicators turning up sharply from their respective oversold regions and the MACD indicator looking to make a bullish crossover soon, they further support our view that the growing upside momentum for this counter.

- We expect the rebound to meet an initial resistance at $1.35 (minor peaks in mid May ’09 and early Jun ‘09), breaking which, the next key resistance is at $1.42 (Apr ’09 high)

- Beyond the $1.26 key support level, we expect subsequent support at $1.19 (Nov ’08 low).

Plantation - Demand destruction if India reimpose import duty

India edible oil traders, Solvent Extractors' Association of India seek import taxes on edible oils. The proposal suggested the following tax structure: -
- 20% crude palm oil
- 25% on crude soybean oil
- 20% on sunflower oil
- 30% on RBD palm oil, said Ashok Sethia, president of the

Crude palm oil (CPO) price is likely to be weaken again with this negative news from India. CPO future price already corrected by 14% from its peak of RM2,620/tonne on 1 Jun 09 to RM2,250 yesterday. We reckon that this correction could have factored in the weaker demand from India after reocrded high edible oil stock. The news of potential reimpose import duty could add downward pressure on price but we are not expecting a severe correction.

Market awaiting for USDA report on 30 Jun 09. In the latest Oil World report, it expect the 30 Jun 09 USDA report on actual plantings will show a considerably higher than intended US soybean area. This would be negtive to edible oil global prices.


Recovery of palm oil production later than expected. Checking with planters review that pick up in production could be delay by 1-2 months. In our early round of checking in Mar 09, we were informed that production would be back to norm by Aug 09. But, now look likely the production will remain weak till Sep 09. The delay in recovery was due to (1) the biological tress stress but already at tail end, and (2) heavy rain in Dec 08-Feb 09 lead to poor polarization reulting in less/poor fresh fruit bunch production . For Jan-May 09, total CPO production is down 3.8% yoy or -258,588 tonnes.

Less availability of soyoil producing countries coverting more into biodiesel. Production of biodiesel in Argentina and Brazil has increased. This translate into a less availability of soyoil for global market. Brazil and Argentina produce 42% of the global soybean and 68.4% of total soyoil exports.

We maintain OVERWEIGHT on Indonesian and Singapore palm oil stocks and UNDERWEIGHT on Malaysian palm oil stocks. Picks: Golden Agri, Indofood Agri and Astra Agro Lestari.

Thursday, June 25, 2009

KepLand ready to take profit


Hourly Chart for KepLand=2.15 (Reaching yellowline...ready to take profit)

S&P 500 ‘Golden Cross’ Signals Stock Gains

The Standard & Poor’s 500 Index is poised to extend its 32 percent rally from a 12-year low in March, according to a technical indicator called the “golden cross” that’s considered a bullish signal by analysts who make predictions based on patterns in price charts.

The 50-day moving average for the S&P 500 exceeded its average price for the prior 200 days yesterday for the first time since December 2007. A 50-day average moving higher than a 200-day average is termed a “golden cross” by technical analysts. Read full article at http://www.bloomberg.com/apps/news?pid=20601110&sid=acVLQrcQI664

Not a V-shape Recovery

World Bank has lowered its 2009 global growth forecast to a 2.9% contraction yesterday, its first since World War II. This reaffirms our view that the global economy is unlikely to experience a V-shape recovery.

Talks about V-shape recovery started to emerge towards the end of first quarter and getting stronger into May 2009. This was due mainly to the emergence of bottoming out signs in the first quarter of 2009. The US Factory Orders turned positive in February 2009, after six consecutive months of fallings.

Japan industrialproduction also stopped its five months of declines and started to register positive growth in March 2009. China industrial production year-on-year growth rate doubled to 11% in February 2009, from less than 6% growth in last two months of 2008, and German industrial production growth rate also turned positive in March 2009 after several months of declines.

While the sharp declines in global productions have halted, there are no signs that they are moving back to the pre-Lehman crisis level. In absolute term, the US Factory Orders remained weak in March and April 2009. Although Japan Index of Industrial Production has improved in March and April 2009, it is still below its January level. German industrial production remains weak despite signs of stabilization.

A V-shape recovery will require the US, Japan and German production to grow at a very fast rate in the next few months. Even the recovery phase of the US Factory Orders during the early 2000 recession was not really a V-shape recovery.

Thus, while we believe that global economy has bottomed out, it is not likely to experience a V-shape recovery. Recovery is likely to be slow and gradual with many pitfalls along the way.

Plantation Sector - Expecting Profit Taking

Crude palm oil (CPO) 3-month future contract corrected to RM2,157/tonne, down RM128/tonne yesterday and this was the single largest one-day dropped since 24 Oct 08.

Price corrected due to lower exports. In addition, the latest estimation for 1-20 Jun palm oil export showed a decline of 4.1% mom also lead to aggressive profit taking in the future markets. Based on the estimation by independent cargo surveyor Societe Generale de Surveillance, the declined was led by 66.6% mom drop in exports to India and -30.2% mom to Pakistan. While China has increased it palm oil import by 10.1% mom for 1-20 Jun 09.

Expecting profit-taking in plantation stocks. Malaysia-listed plantation stocks still holding well despite the 20% CPO price correction. We expect the sharp fall in CPO price yesterday should prompt profit-taking in the plantation sector, especially those Malaysia-listed companies.

But turning point to come by end-3Q. We are expecting CPO price to move up again in Aug/Sep on the back of the pick up in exports and also potentially lower than expected monthly production. This increase in CPO price in end-3Q to be supported by:

-Higher domestic demand for top 2 palm oil producers, i.e. Indonesia and Malaysia in preparation for Hari Raya Puasa.

- Exports to pick up in 2H. 2H would be a stronger half for exports due to the festive demand from India (Deepavali) and China (Mid-Autumn Festival), which showed higher demand in 2H vs 1H.

Wednesday, June 24, 2009

Global equity technicals - Minor rebound soon?

As expected, the US stockmarket correction has kicked in. However, it appears likely that this correction phase is at its tail end. Assuming wave "c" equals wave "a", we are looking at an S&P target of 875. The daily chart shows the likely completion of minor wave "a" soon, to be followed by a minor wave "b" rebound. But it is unlikely that the rebound ahead will surpass the Jun high. The US Dollar Index has been trading sideways since breaking out in early Jun. A pullback below 79 would be bearish for the index. In line with the expected rebound of the US stockmarket soon, Asian markets should also bounce back but are unlikely to surpass the Jun highs. A rally above the Jun highs would indicate that a more bullish wavecount is taking place.

Any technical rebounds from the yesterday's near 2% loss is likely to be muted and short-lived with the STI still on track to head for our initial key support at 2194 (23.6% Fibonacci retracement of the recent surge from 1455 to 2424).

Any negative breakout from the 2194 level could mean further correction towards the major support at 2053 (38.2% Fibonacci retracement of the same rally), which seems unlikely to be tested at this point in time.

Next Resistance level: 2400 (Psychological cap)
Immediate Resistance level: 2300 (Psychological cap)
STI Current: 2226.10 (Last close: -1.8%)
Immediate Support Level: 2194 (23.6% Fibonacci retracement of Mar rally)
Next Support Level: 2053 (38.2% Fibonacci retracement of Mar rally)

Ready for a technical rebound short term KepLand


MACD divergent. Hourly Chart for KepLand=2.10 (Ready for a technical rebound short term...yellowline at 2.176)

SPDR Gold Trust - Breach of key supports suggests further correction

- SPDR Gold Trust could face more downside pressure in the weeks ahead after breaching several key supports, provided by the 8-month uptrend line and also both the 50-day and 100-day MA yesterday on relatively heavy volume.

- This especially if the shares fail to regain US$92.93 (support-turned-resistance level and 8-month uptrend line).

- But with the RSI indicator just falling into the oversold region under a strong downtrend momentum and the MACD indicator exhibiting a bearish centerline crossover yesterday, they support our view that further correction is likely.

- We expect the stock to find initial support at around US$87.66 (resistance-turned-support level), breaking which, the next key support is likely at US$85.06 (resistance-turned-support level and 200-day MA).

- Beyond US$92.93, the next resistance is at US$97.00 (Jun ’09 high).

Tuesday, June 23, 2009

Dry Bulk Shipping - On the doorstep of a correction?

The substantial rise in the Baltic Dry Index over the past six months, despite global weakness in steel production and electricity demand, has been driven single-handedly by Chinese buying of iron ore and coal, as the freight-inclusive cost of iron ore and coal imports fell below domestic alternatives from the start of 2009. However, the tsunami of imports may be coming to an end. Adding the rise in the fob prices of commodities and the more expensive freight, the cfr prices of imports have now closed the gap with domestic Chinese prices. Furthermore, we expect sequential capacity growth of some 10.2% in 2H, against just 3.1% growth in 1H. These factors could cause the average BDI for 2H09 to be lower than in 1H09. Therefore, we remain UNDERWEIGHT on dry bulk shipping and continue to recommend UNDERPERFORMs throughout our universe. We also downgrade Pacific Basin from Neutral to Underperform.

STI first target 2100, then 1950


You can see that the first support of 2,100 is around the 38.2% retracement level of 2,054..... and the next support at 1,950 happen to be around the 50% retracement level of 1,940.

HSI has more to fall


HANG SENG INDEX (Fall below yellowline - a significant event) Do not underestimate the decline phase....it has more to fall...

Oil's Channel Break May Signal End to Rally

Oil prices moved out of a so-called ascending channel that started in April, signaling crude's rally may falter.

Crude oil for July delivery fell 2.6 percent to $69.55 a barrel on June 19, the biggest drop for the front-month contract in two weeks. It was the first close outside a channel that's bounded intraday highs and lows during the last two months, Zug, Switzerland-based consultant Petromatrix GmbH said today.

"The ascending channel was invalidated for the first time and this clearly need to be taken as a negative," Petromatrix managing director Olivier Jakob said in a note to clients. "The correction on Friday was very severe."

Prices gained 60 percent from a low of $43.63 on April 21 to reach a seven-month high of $73.23 on June 11. Oil for July fell as much as 1.7 percent to $68.89 a barrel today, the last day of trading for the contract.

Traders will watch today's close on the more-actively traded August contract to gauge whether prices are set to fall further, Jakob said. A settlement below $70 a barrel would be a bearish signal, he said. It traded at $68.68 a barrel at 11:14 a.m. London time.

Monday, June 22, 2009

SIA trading idea

Near lower end of 50-cent trading range with tendency to end significantly higher than day’s lows make stock worth trading buy below $12.50

Underpinned by its generous SATS share distribution and dividend (going ex on Aug 13) SIA has made a strong 45.6% recovery from March $9.30 low to recent $13.54 high.

This is above key $12.90 historic resistance (nearest after $12.90 is $14.50) and has not only opened up trading chances around current $12.40-90 band but for medium term investors, chances are high stock would move to higher ground ahead of mid-August.

This is especially so since counter has started a new trend of pulling back above 13-day MA buy signal and swiftly covering last Monday’s minor gap causing it to fall to week’s $12.34 low.

However it managed to pick up to $12.46-50 at days’ closings in first 3 days last week helping it to surge to $12.86 on Friday and $12.90 this morning. Both instances it briefly recovered to above 13-day MA (at $12.80 now) before falling to lower end of $12.40-90 range.

SIA had briefly rallied to above $13 earlier in May (high of $13.22) and stayed well above $13 a month later for 4 days in a row, setting up bullish technical signs (eg rising monthly MACD for first time since end-2007 and should cut MA in coming weeks).

Longer term 100- and 200-days MAs too look promising in terms of bullish cut going forward.

Having crashed 55% from $20.20 peak in Oct 2007 to $9.05 a year later and a higher $9.30 low last March, stock remains well below long term average.

Recovery More V than U - Raising STI Target to 2700, Recession May Be Over by 3Q

Upgrading STI target to 2700 (from 2400), PBV mean (1.62x) – This recession may be over by 3Q rather than 4Q, in line with durations of past recessions. With a more normal V-shaped recovery, we have removed the 0.5 standard deviation discount from the PBV mean. Ample liquidity raises the risk of an overshoot, as governments and central banks worldwide will likely maintain policy stimulus at least until early 2010.

Recovery looks more like a normal V rather than U – Industrial production contracted only 0.5% in April. PMI is back above 50 in May. Job losses and loan activities have turned out better than past recessions. Economist Kit is forecasting GDP growth of -5% in 2009 and +6.2% in 2010, with risk now on the upside.

Pullbacks during recovery cycles are few, short and limited – This pullback maybring the STI down to about 2,150, in line with average pullbacks in past cycles (- 10% over 5 weeks), which is about one standard deviation below the PBV mean. We view this market pullback as a buying window for the next leg up.

In past recovery cycles, STI reverts to P/B mean in less than a year – 1998 Asian crisis (32 weeks), 2001 tech recession (15 weeks) and 2003 SARS recession (45 weeks). These past recovery cycles also saw the STI overshoot the P/B mean by at least +0.5 standard deviation. This STI recovery rally is still in its early stage, at 13 weeks, well short of the average 101 weeks seen in past recoveries.

Local banks are biggest beneficiaries in post-crisis world – Banks are benefiting from wider interest margins, re-intermediation (from corporate bond market) and retreat by foreign banks from corporate lending. The impact is significant in Singapore, as foreign banks account for a large 40% share of total lending. This NPL cycle moreover looks benign compared to past recessions.

Outperformers vs. underperforms – Banks are typically outperformers at every phase of recovery cycle, while developers tend to overshoot in early stage and underperform or even fall in late recovery phase. Even defensive laggards tend to catch up, with sector variations in beta converging as STI approaches P/B mean.

Top Buys & Sells – Top Buys: DBS, UOB, SGX, Keppel, ST Eng., Singtel, NOL and Parkway. Top Sells: SIA, Capitaland and Keppel Land. Overweight financials & commodity-related names, underweight property developers and land transport, and neutral on telcos. Prefer playing also the laggards in this phase of recovery.

Friday, June 19, 2009

STI - just a technical rebound?


Straits Times Index (Just a technical rebound....good to reduce more holding)

Weakness in STI Up Ahead


STI may stage a rebound towards 2,300pts first before further declines. Next target should be about 2,220pts. Do stay out and not chase this rebound, at least wait till 2,220 before reassessing again.

The STI has formed a rather clear momentum divergence and is also confirmed by almost all the first and second tier stocks. This lack of buying pressure does not seem to be confined to the blue chip STI only.

15 June 09 and 16 June 09 have also shown a rather bearish advance/decline ratio of 1:5 and 1:4 respectively. In other words, a good bulk of the stocks have decline over the past 2 days, telling us there is weakness across the board.

From a technical stand point, the past 2 days have been important as they confirm the momentum divergence in the STI as well as for many individual stocks.

The stocks below are meant to be examples of signs of weakness to look out for as we cannot cover all the stocks available. Investors should be wary of stocks that show momentum divergences or lower highs at this juncture. In general, almost the entire Singapore market is telling us that there is weakness up ahead.

The market is telling us that there seems to be weakness in the immediate future through failure to make new highs, momentum divergences as well as weak market breadth. Our targets for this pullback are 2200 and upon clearing 2200, possibly 2050.

The STI has run up substantially over the past few months and currently is displaying signs of a top. While visibility for how long or how deep the correction will last (if it even unfolds that way) is rather limited.

However, given that the majority of stocks across the board are giving the same message of impending weakness to us, it would be a prudent decision at this point in time to take a good bulk of profit off the table.

Should there be another leg to the upside, there should be ample opportunity to re-enter the market again. We prioritise the preservation of capital and profits and advise investors to stay out/exit long positions for the time being.

Allgreen - Breaching of key supports suggests more correction to come

Allgreen could see more downside pressure in the days ahead after breaking below S$0.95 (the 23.6% Fibonacci retracement level of recent rally) on relatively high volume.

With the indicators (RSI, MACD and ROC) convincingly falling under their respective 3-month uptrend lines recently, they support our view that the downtrend momentum is building up and further correction in the weeks ahead is likely.

We expect the stock to find initial support at $0.84 (38.2 Fibonacci retracement), breaking which, the next support is likely at $0.75 (50% Fibonacci retracement)

Immediate resistance is pegged at $0.95, ahead of $1.14 (2009 high).

Thursday, June 18, 2009

Technical Analysis on Singapore 3 Bank Stocks

The 3 banking stocks in Singapore generally tend to trade in rather tight lockstep. This seems to be the case this time as well. All 3 stocks have formed tops at this point in time.
OCBC displays a lack of momentum, trading sideways in a rather tight consolidation for about a month. During this time, momentum has been fading as seen by the divergence in price and stochastics.

UOB has shown a rather textbook momentum divergence. A push to recent highs price wise but a lower high in momentum. This tells us internal buying pressure is weak.

DBS’s price formation is slightly messier than OCBC and UOB, but has arguably topped out in the short term after testing resistance at S$12.82.

Stronger technical rebound likely once STI 2200 is tested

At today's 2259 low, the STI is down 6.8%, within recent 3.7% to 8.3% pullback ranges. It is now below 13-day MA for 3rd day in a row today as it is unlikely to climb back to this MA at 2354 currently.

The last time it stayed below for 7 days in a row was during the second half of April's 8.3% fall from 1947 to 1791, the biggest since the rally from March 9 low of 1455. An equivalent 8.3% fall will take index to 2224.

Since nearest key support ie the May 8 high of 2284 has been broken, next key support levels to watch out are 2190 (around 2200) and 2095 (around 2100).

The 2000 psychological level should hold as a correction from 2425 to this level is 17.5% which would be too severe and may break the bull's back.

The current fall can still be regarded as a pullback as it should not exceed 10% (at 2183).

A 38.2% retracement of the rally from 1455 to 2425 will take STI to 2054 while the half way mark is at 1940 (near the earlier resistance of 1960/1947.

There should be a rebound once 2200 is tested but traders must be quick to take profits as the downphase may last another week before midyear window dressing come in starting next Friday June 26 till June 30.

Wednesday, June 17, 2009

Dow at critical support and STI support levels


DJ INDU AVERAGE=8,504 (At critical support at 8,497 - yellowline 34SMA)

Renewed worries about the economy surfaced on news of a seventh monthly drop in industrial production, which overshadowed better-than-expected reports on home construction, building permits and inflation.

But most market watchers believed that the temporary pause (pullback) is necessary for the market to move higher later ? in fact, many said they would be alarmed if the market had continued to move up in an unbroken line as this would suggest indiscriminate buying.

Besides the mixed economic reports, the weaker USD and its impact on commodity prices and Treasury yields has become another of investors' main concerns.

For STI

Nevertheless, we can expect to see a retest of the same support, now at 2278, as our key support remains at 2194 (23.6% Fibonacci retracement of the recent surge from 1455 to 2424), which is also close to the lower Bollinger Band.

We peg the major support at 2053 (38.2% Fibonacci retracement of the same rally), which we think is unlikely to be tested.

On the sell-down has abated, we are still looking for the index to edge higher towards 2465, although 2400 may continue to pose as a stiff resistance.

Next Resistance level: 2465 (Double-bottom objective)
Immediate Resistance level: 2400 (Psychological cap)
STI Current: 2288.16 (Last close: -1.2%)
Immediate Support Level: 2194 (23.6% Fibonacci retracement of Mar rally)
Next Support Level: 2053 (38.2% Fibonacci retracement of Mar rally)

Rickmers Maritime - Island top pattern suggests more near-term downside


Rickmers Maritime is likely to face further correction pressure with the completion of an island top reversal pattern during yesterday’s negative breakout at the $0.56 key support level on heavy volume.

This suggests that the previous rally from its early Apr low may be over.

With the RSI cutting below both the 3-month uptrend line from inside the overbought region 2 days ago and the MACD displaying a sharp bearish crossover yesterday, they seem to echo our views that the further downside pressure could be building up.

We expect the stock to find initial support at $0.45 (the next key resistance-turned support level), breaking which, the next support is likely at $0.32 (all time low)

Immediate resistance is pegged at $0.56 (key support-turned-resistance level), ahead of $0.65 (2-year downtrend line).

Tuesday, June 16, 2009

SPH - Violation of key support suggests further downside in the near term


SPH could see more downside pressure in the days ahead following the breach of the lower boundary of the 3-month uptrend channel and the key resistance-turned-support level of $3.10 in the last trading session.

With the RSI displaying a bearish divergence to the price action over the last 2 months and the MACD breaking under its 3-month uptrend line yesterday, they seem to echo our views that the uptrend momentum is waning and a further correction is likely.

We expect the stock to find initial support at $2.82 (the next key resistance-turned support level), breaking which, the next support is likely at $2.62 (minor troughs in Jan and Feb ‘09)

Immediate resistance is pegged at $3.10 (key support-turned-resistance level), ahead of $3.29 (Jan ’08 and Jun ’09 peaks).

Chartered CSM - positive news flow

Following CSM’s upward adjustment (narrowing its 2Q ‘09 estimated loss from US$59mln to US$49mln while raising its sales guidance from US$327mln to US$343mln) in 2Q ‘09 guidance last friday morning, its major customer Qualcomm also raised its 3Q ending June ’09 sales guidance to at least US$2.67bln versus last guidance of at most US$2.6bln (consensus were expecting US$2.55bln), while operating profit will be at least US$830mln versus last guidance of at most US$650mln. Qualcomm is benefitting from China’s launch of their 3G network services.

Other signs to support the recovery of the semiconductor sector can be seen in a recent 10-30% increase in prices of testing and packaging of chips, according to Digitimes.com. This should bode well for STATS whose core business is in the test and packaging of chips.

And currently running close to full utilization rates, UMC, the second largest foundry have raised its ownership in privately held China-based foundry Hejian Tech from 15% to 85% (Digitimes.com reported that UMC plans to double Hejian Tech’s production capacity soon after acquiring a controlling stake in the company).

CSM’s share price was around the $2.20 price level but fell close to the $2 level when CSM’s board dismissed the takeover rumours. But its share price have climbed to $2.36 as of last friday (up 3 cents) after it’s upward guidance for 2Q ‘09 performance. We do not have a rating on CSM.

World wide technical index + Asean

Crunch time. This week promises to be crucial for global equity markets. The hourly chart for the S&P500 shows a triangle breakout a few days back, with the index reaching a weekly high of 956 before pulling back.

Peak or start of a major upleg? The 956pt week’s high could be the end of wave “a” which started when the S&P500 hit 667pts in early Mar. This is a gain of more than 43% in less than four months. A break below the crucial 927 support next week would confirm that 956 was a major peak for the S&P.

Bullish outlook also possible. However, the recent rally from 927 to 956 over the past few days could also be wave (i) of 5, which would mean more upside for the index in the next few weeks. Confirmation if S&P 500 breaks above 956 high.

Potential US$ rebound still valid. The Dollar Index’s rebound remains valid unless it goes below the early Jun 78.3 low. Last week, we highlighted the potential for a US$ rebound. The Dollar Index reached as high as 81.5pts early last week before pulling back and finding support at the trend line.

Great Wall cracking? The mighty China equity market showed signs of cracking towards the end of last week. The Shanghai Composite Index has been trading in an uptrend channel since Mar and the key support trend line for this week is 2,650-2,660. This support level must hold or a more meaningful correction might kick in the next few weeks.

Asian markets go sideways after hitting resistance. Since early Jun, after hitting the crucial 401pt 38.2% Fibonacci retracement (FR) of the 689-223 decline in 2007-08, the MSCI Asia ex-Japan (MAxJ) has been trading sideways. Its daily MACD and RSI technical indicators are showing strong negative divergence and probability favours consolidation ahead. The main support trend lines for the MAxJ are at 388 and 368pts. A break below 368pts would probably confirm a more meaningful consolidation ahead.

But bullish if MAxJ rallies. We would, however, turn bullish on Asia if the MAxJ took out its 405 Jun high in the coming weeks. This would indicate that the consolidation since early Jun has ended in a “flat formation” pattern.

ASEAN

Uptrend still relatively intact Stock markets ended the week mixed but with a positive bias, as economic indicators were still supportive of equities. Regional equities indices were up 1-4% with the exception of the FSSTI, which lost 0.8%. Value traded was on the weaker side compared to a week ago. US equities meanwhile closed the week up by no more than 1%.

Bull cycle evolution As the extended bottoming process equities gives way to what most cautiously perceive as a bull market, an examination of the evolution of the bull cycle valuations becomes more relevant. This is especially given that equities have been on a tear since March. Are things looking expensive relative to the previous experience, which we take as the 2003-2007 upcycle?

P/Es make quick gains The forward P/E valuations for all markets are bouncing off troughs from a higher starting point in this current cycle, and registering steeper gains as well. Within three months or so, the JCI has managed to claw its way back to mid-cycle P/E valuations. But the problem lies in the EPS projections – it has yet to catch up unlike its ASEAN peers. Its three ASEAN neighbours are still trading below mid-cycle P/Es, with better forecast 2010 EPS growth compared to the EPS CAGR throughout the full bull cycle of 2003-07.

P/BV more reasonable The P/BV looks a little less demanding, despite the pace of gains. As steep as the climb had been, all remain below their mid-cycle levels. The forward ROE trends look favourable for the KLCI and FSSTI, but flattish for the smaller JCI and SET markets. There is less of an urgency to see upgrades for the SET as its corresponding P/BV is still reasonable. However, the JCI again raises eyebrows, trading at closest to its mid-cycle P/BV when ROEs are still stubbornly stagnant. This is one market that needs some good news on the earnings front soon.

Monday, June 15, 2009

STI another 100 points of downside?


Straits Times Index=2,330 (Further correction could take STI to 2,226...so another 100points of downside)

Hyflux ready to sell


Hyflux=$2.30 (Reaching target, ready to sell)

Technically buy Gaint Wireless and Swing Media, SELL SPH

Singapore Press Holdings (SPH SP; S$3.12) – SELL

• The longer term chart for SPH shows that the stock is still in a long term bear decline. In the short term, it is still trading within an uptrend channel. The stock is sitting exactly on the resistance turned support at S$3.12.

• Since the stock has risen from a low of S$2.31, investors may want to take some profits on any rally. Sell on any rebound. Resistance is seen at S$3.20-3.30 and S$3.45.

• The key support for the stock is at S$3.05-3.07. Closing below this levels are bearish for the stock as it could pullback to retest S$2.65 with S$2.80 providing some support in between.

Singapore Press Holdings Limited publishes, prints, and distributes newspapers and magazines. The Company also invests in properties, provides multimedia, broadcasting, and telecommunications services, manages shopping centers and other commercial properties, and operates Internet portal site.

Swing Media Technology (SWM SP; S$0.07) – BUY

• The stock has been rising steadily since breaking out above its long term resistance trend line in April.

• Both indicators have stayed positive, suggesting that this run still has legs. The RSI has yet to reach overbought levels, further supporting the positive view.

• Investors would be better off buying on weakness. Support is seen at S$0.06-0.065 while resistance is at S$0.09-0.10.

Swing Media Technology Group Limited is a manufacturer of data storage products. The Company manufactures video cassette housing products, compact discs (CDs), digital versatile discs (DVDs), compact disk recordables (CD-Rs) and business card CDs. Swing Media Technology trades plastic resins and packing materials as well.

Giant Wireless Technology (GWT SP; S$0.04) – BUY

• The stock appears to be testing the long term bullish wedge pattern’s upper resistance at S$0.045. Breaking out above this resistance level is bullish for the stock, with the next resistance seen at S$0.06-0.065.

• Indicators are marginally positive with the MACD widening its gap but RSI staying rather flat.

• Investors may want to accumulate on weakness. Support is seen at S$0.03-0.035.

Giant Wireless Technology Limited designs, manufactures, and markets wireless telecommunication products mainly on an original design manufacturer (ODM) basis. The Company's key products are analog and digital cordless telephones, citizen band (CB) and family radio services (FRS) radios.

CapitaCommercial Trust - Bullish piercing pattern with tweezers bottom suggests likely near term rebound

CapitaCommercial Trust may see more upside in the days ahead following the double formation of a tweezers bottom and the bullish piercing pattern at the 1.5-month uptrend line on heavy volume.

With both the RSI and MACD indicators’ respective 3-month uptrend lines still intact, coupled with the golden cross of the 50-day MA above the 200-day MA a few sessions ago, they seem to suggest that the upside momentum is still going strong.

We expect the rebound to meet an initial resistance at $1.00 (2-year downtrend line), breaking which, the next key resistance is at $1.09 (support-turned-resistance level in Jan ‘08)

Immediate support is meanwhile pegged at $0.87 (resistance-turned-support level), ahead of $0.80 (3-month uptrend line).

Friday, June 12, 2009

Jardine C&C - Potential breakout at key resistance

Jardine Cycle & Carriage could be poised for more upside in the weeks ahead. It has not only managed to break above its 1.5-year downtrend resistance line but also closed above the key resistance-turned-support level of $18.34 (last seen in early Apr ’08) on relatively high volume.

We note that the bullish breakout was accompanied by both the RSI and Accumulation/Distribution indicators rebounding off their near 4-month uptrend line recently. Coupled with 100-day MA crossing above the 200- day MA a few days ago, they seem to suggest a renewed strength in the uptrend momentum.

However, on a cautious note, we would advocate waiting for a successful retest of this resistance-turned-support level or the 1.5-year downtrend line, which should serve as confirmation of the breakout.

Immediate support is pegged at $18.00-$18.33 (key resistance-turned- support level), ahead of $16.49 (3.5-month uptrend line).

Should the breakout materialize, we expect an initial resistance at $20.28 (Apr ’08 high), breaking which, we see the next resistance at around $22.34 (minor peaks in Nov ’07 and Jan’08).

CCT - Trading Buy, Target $1.00

CCT rights closed at $0.295 yesterday, while the mother shares (CCT) closed at $0.91. Imputing the exercise price of $0.59 for each rights share, there is a 3% implied discount by buying the rights and converting to CCT shares.

We are recommending a Trading Buy call on CCT, with Target Price at $1.00.Our preferred mode of entry is via the rights shares, due to the gearing effect. While we are cautious on the office sector due to the impending supply (~10m sq ft) coming onstream over 2009-2012, a 14% increase in the existing office stock at a time of negative office space demand, the investment case on CCT rests on the following:

Post-rights issue, the balance sheet has strengthened with gearing brought down from 43% to 30%, enabling the REIT to better withstand further decline in rentals and capital value.

Company has a portfolio of prime office assets with a good spread of anchor tenants pre-committed at low rental rates and unlikely to leave.

P/Book of 0.6x is in line with other office landlords (ie Singapore Land), despite CCT having written down portfolio value by 10% in the May revaluation exercise. Office landlords have been relative laggards in the market rally.

Stock is off 10% in the past 5 trading sessions, and currently trades at only 10% premium to theoretical ex-rights price of $0.825, compared with other Temasek/Capitaland-sponsored rights issues which have performed much more handsomely with premium of 20% or more.

Thursday, June 11, 2009

Epure - Bullish harami pattern formation suggests near term upside

Epure could be heading higher in the near term with the formation of a bullish harami pattern on heavy volume yesterday, following the tweezers bottom at its key resistance-turned-support level and 2.5-month uptrend line.

With both the RSI and Accumulation/Distribution indicators signaling a sharp rebound from their 3.5-month uptrend lines respectively, they also suggest a resurrection of the uptrend momentum.

We expect the rebound to meet an initial resistance at $0.57 (1.5-year downtrend), breaking which, the next key resistance is at $0.66 (Mar and Jul ’08 high)

Immediate support is pegged at $0.465 (resistance-turned-support level), ahead of $0.42 (resistance-turned-support level).

Indo Agri filling the gp?


IndoAgri=$1.37 (Gap waiting to be filled)

Wednesday, June 10, 2009

Swiber - Latest 21.3% plunge from historic $1.08 resistance

The stock is undergoing a sizeable correction on similar scale as mid-May when it plunged 23.6% from 97.5c to 74.5c.

Due to failure of 4 attempts to clearly break historic $1.07 resistance at end-May (highs of $1.06 to $1.08 reached) it has fallen 21.3% to 85c low yesterday below another multi-year 94.5c support and close to the next one at 82.5c.

A repeat of the mid-May plunge will take it exactly to 82.5c, which should be a strong support, more so now that the counter is trading below its 13-day MA buy signal (96c) for the 8th day in a row.

Surprisingly during the mid-May correction Swiber held up well above this MA and this is the longest stretch since the March 23.5c bottom that this is happening.

A 38.2% retracement of the run-up from 23.5c to $1.08 ie to 76c (near mid-May low of 74.5c) is unlikely.

This is because longer term MAs are all bullish with the 50 and 200 days making a golden cross recently while the 100 days is heading towards another cut with 200-days.

RSI at 51.3 is at lowest since end-April 46.2 at point when it broke out past 50c. The weekly MACD is still on the rise having cut its MA.

With the stock out of downtrend channel a trading range around 83-94c is likely as the stock builds a new base for another assault at $1.06-08 in coming weeks.

Baltic Dry Index - expected correction in June / July

Background: The BDI surge is driven by very strong purchases of iron ore by small/medium Chinese steel mills and traders:

1. The small Chinese mills produce the bulk of long steel products, which may have seen a pick-up in demand in recent months from the Chinese stimulus programme. They also expect to see a further pick-up in long steel product demand in the quarters ahead.

2. The price of long products has risen in line with demand, and the small/medium mills are able to capitalise on the higher product price, against the very low spot price of iron ore, to capture a 200 yuan/tonne profit on the production of long products.

3. The traders are buying iron ore because they are betting on a rise in the iron ore price in the quarters ahead. In fact, they made a good call, since iron ore spot prices reached as low as 40% discount from last year's benchmark price early 2009, but are now trading at about 33% discount from last year's benchmark.

4. There is also a rush in April and May for more imports from India, as India will enter its monsoon season from June to September, which typically restricts the loading of vessels on its west coast Goa port.

5. About half of the Chinese iron ore mines have closed down over the past few months, because their cost of production is around US$67-73/tonne and they sell for US$87/tonne, whereas Indian iron ore can be imported at a cfr cost of US$67-68/tonne including freight. Indian ore is higher quality than domestic Chinese ore. Same goes for Australian ore. As a result, Chinese mills' reliance on domestic iron ore has reduced from 35-40% in Jan 09, to just 25% in Apr 09.

Reasons #1-4 are cyclical, where reason #5 is more structural.

Is this sustainable? There are a couple of reasons why BDI is ripe for a pullback.

1. Steel market experts have recently warned that there is a big surplus of long product inventory in China right now. Not to mention a huge surplus of iron ore inventory. Many steel mills in South Korea, Japan, Russia and Ukraine are exporting HRC and CRC into China, to take advantage of the higher domestic Chinese price against low international price. This could exacerbate the oversupply situation, which could lead to lower finished steel prices. If this happens, and iron ore prices continue to appreciate, the 200 yuan/tonne profit margin could narrow or disappear. This could cause the swing producers (small/medium mills) to cut output, leading to lower imports of iron ore.

2. The coming Indian monsoon season.

Will the pullback take BDI below breakeven? We don't think so, because of the Chinese stimulus spending.

STI short term rebound target and SSE bearish divergent


Straits Times Index=2,354 (As technical indicators are Overbought.... short term rebound will be cap at 2,364)


SSE A SHARE IDX (Continue to show Bearish Divergent)

Biosensors retraced to yellowline


Biosensors=$0.50 (retraced to yellowline already. for those who sold at 0.58 can look to buy back)

Tuesday, June 9, 2009

Technical Analysis on Global Indexes

Straits Times Index: Appearing toppish, now targeting 2,220

No longer bullish. Elliot Wave Count on the Straits Times Index (FSSTI Index) highly suggests that Wave 5 has been completed when the index hit a high of 2,424 as it is matching Wave 1 with utmost precision ( Elliot Wave principle suggests that Waves 5 usually travel the 100% of Waves 1 ). Furthermore, with the 14-day RSI still remaining in overbought territory, we do not recommend investors to engage in long positions at present levels.

The long-awaited correction could occur very soon, as the current Wave A is expected to translate into losses for the STI. Nevertheless, there is also the possibility that the STI could first enter a consolidation period before staging a move lower, as markets do not always move in a straight line. Initial support is identified at the 2,220 – 2,234 level, as outlined by the 61.8% fibonacci retracement of Wave 5 and a series of daily lows. Further support is also seen at the 2,094 mark where the 100% fibonacci retracement of Wave 5 and the lower bollinger band converge.

Meanwhile, although we do not foresee resistance at the 2,424 – 2,433 level to give way, additional resistance is nonetheless available at the 2,605 – 2,622 zone. This level signifies the 161.8% fibonacci extension of Wave 1 and a certain technical gap.

Shanghai Composite Index: Approaching inflexion point, trend to turn bearish

Bullish trend was inline with expectations. Price action of the Shanghai Composite Index (SHCOMP Index) was bullish as we had forecasted but overshot our target of 2,743. However, the current breakout move arising from the Symmetrical Triangle formation seems to have hit exhaustion while Wave Count suggests that Wave A may be kicking in very soon. We thus are no longer bullish on the index.

Reaching inflexion point. As Waves 5 usually travel the entire price length of Waves 1, the index may have already seen the completion of Wave 5 when it hit a high of 2,791 which is very close to its target at 2,808 ( Wave 1 = Wave 5 = 2100 – 1664 + 2372 ). Coupled with the 14-day RSI trading very close to overbought levels, we do not expect the index to break through this resistance mark. Nevertheless, should it occur otherwise, its next level of resistance is seen at around the 3,071 mark as represented by the 161.8% fibonacci extension of Wave 1 – the next most likely target for Waves 5.

Pullback to occur, initial price target at around 2,650. The impending downtrend in the form of Wave A should encounter its first support at the 2,635 – 2,668 area where a technical gap resides. Should this level fail to hold, additional support is identified at the 2,536 – 2,539 range as represented by the 61.8% fibonacci retracement of Wave 5 and the lower bollinger band.

Dow Jones Industrial Average: Resistance just around the corner, bullishness to subside

Current Wave 3 may end soon. We have broken down our Wave Count for the Dow Jones Industrial Average (INDU Index) into sub-waves and we now reckon that the index is presently riding on a Wave 3. With the 100% extension move of Waves 1 being one of the price targets for Waves 3, it is highly probable that the Dow may have limited upside left in the short term, given that resistance is just around the corner.

Should Wave 3 travel the 100% move of Wave 1, initial resistance is identified at 8,899 ( 7931 – 6469 + 7437 ). Given that the MACD chart is looking flat, however, we do not expect this level to be broken. Nevertheless, should events happen otherwise, the next resistance should beseen at the around the 9,794 – 9,803 area. This level represents the 161.8% fibonacci extension of Wave 1 and a certain daily high.

Should the index fail to take out the 8,899 mark as we have anticipated, price action could then turn bearish resultantly. Support, located at the 8,156 – 8,246 range as identified by the 50- day moving average, the lower bollinger band and a series of daily lows, would be expected to cap any downside pressures.

S&P 500 Index: An impending turnaround

As with the Dow, the S&P 500 (SPX Index) has also been broken down into sub-waves. While its Wave Count may be similar to that of its counterpart, note that the S&P could have already over-extended its run as its current Wave 3 has traveled slightly more than the 100% of Wave 1. Coupled with the flattening 14-day ADX which signals that the present trend is no longer gaining strength, it is thus possible that the S&P may turn down anytime soon.
Resistance just ahead. Initial resistance is situated at the 951 mark, courtesy of the end of Wave 3 and the upper bollinger band. Should price action appreciate above this level, further resistance is then available at the 1,044 – 1,047 region as represented by the 161.8% fibonacci extension of Wave 1 and a certain daily high. On the other hand, should the index turn bearish from present levels as we had forecast, support at the 878 – 881 area as outlined by a series of daily lows should serve to prevent any further declines.

Hang Seng Index: Not looking bullish

Not looking positive. The Hang Seng Index (HSI Index) has seemingly completed 5 waves up while the impending 3 waves down is expected to drag the index down to lower levels. With the present Wave A still in its infancy stage, we recommend investors to cash out before any additional downside unfolds. The MACD chart that is currently flattening out also signals that the HSI is no longer bullish.

Initial price target at 17,340. The present Wave A is expected to pull the HSI to the 17,340 – 17,347 support zone at the very least. Should this level be broken below, Wave A should then extend itself to the 16,334 mark to complete the full retracement of Wave 5. Meanwhile, we do not expect resistance at the 18,961 – 18,967 region as represented by the upper bollinger band and the end of Wave 5 to give way.

UOB - Dark cloud cover pattern suggests further near term correction


UOB could see more downside pressure in the days ahead with the formation of a bearish dark cloud cover pattern at the key $15.60 resistance level. The failure to convincingly break above this level for a 2nd time in one month also seems to suggest tough resistance at this level.

With both the RSI and Force Index showing bearish divergences to the price action in the last month and the MACD breaking under its 3-month uptrend line recently, these seem to echo our views that the uptrend momentum is waning and a near term correction is likely.

We expect the stock to find initial support at $14.00 (3-month uptrend line and resistance-turned support level), breaking which, the next support is likely at $12.32 (resistance-turned-support level)

Immediate resistance is pegged at $15.60 (1-year downtrend line and support-turned-resistance level), ahead of $18.00 (key support-turned-resistance level).

An explaination the movements in the Baltic Dry Index (BDI)

This is a great and informative article....

The rise in the BDI has taken everyone by complete surprise. But in reality the reason for the rise is rather simple. China binge buying Iron Ore against all expectations with imports rising at 27+ pct higher in 2009 than for 2008, based on the annualized results of the first 4 months of this year, shows you where the big move from the Demand side has come from.

This rise in Iron Ore imports is despite the fact that Steel production in China in the first four months of 2009 has been roughly at the same levels as we had seen in 2008. An explanation for this increased Iron Ore imports could be from the fact that domestically produced Iron Ore in China is of arather poor quality and quite expensive when compared to spot imported prices. Another explanation could be that of speculators getting into the import market to try and get hold of 'cheap' Iron Ore that would possibly be required under the Chinese Governments USD 586 Billion stimulus plan. And a third could be the impending conclusion of the Iron Ore Contract Price negotiations.

Obviously, when you binge buy and compress imports of a single commodity, carried mainly by Cape size ships, into a very short space in time, you tend to create two issues at the same time. Firstly, you tend to push up freight rates due to the time-compressed/explosive demand growth for that ship-sector. And more significantly, you create queues at loading and discharging ports which tend to reduce availability of spot ships driving prices even higher. Combine this with delayed delivery schedules of dry bulk ships during Q4 08 and Q1 09 and you have the ingredients of a perfect storm especially when you take the number of Cape size ships that have been sent to the scrap-yard during the last 6/9 months.

The change in the average Time Charter (t/c) rate or earnings per day per ship in the different size categories is instructive.

The BDI hit its recent peak on the 3rd June 2009 closing at 4,291 points with the average t/c rate per day per ship for the Capes at USD 93,197, Panamaxes at 28,110, Supramaxes at 19,470, and Handies at 12,668. Compare these numbers with what was prevailing on the 5th December 2008 when the BDI hit a two and half decade low of 663 points, then Capes were earning a paltry t/c rate of USD 2,763 per day per ship, the Panamaxes were at 4,058, Supramaxes at 5,726, and the Handies at 4,352.

Clearly the BDI is more reflective of the Capes and the Panamaxes, as the Panamaxes are a shadow of the Capes, than of the market as a whole.

Besides this sudden, sharp and unexpected rise in the market will have two very bad consequences. Firstly, scrapping will come to a grinding halt. This will stop the squeeze on the supply side which was originating from the permanent removal of ships via the scrap-yards. Secondly, with the new 'confidence' in the market, all the delayed deliveries of new ships from the builders might make a startling reversal and lots of new ships could suddenly start appearing on the market.

Both these consequences will result in long term damage to our market and eventual balance between demand and supply will be pushed further away on the time horizon.

In our opinion, based on the congestion at Chinese discharge ports and the present increased level of Iron Ore imports the index could actually cross 5,000 points. We think that congestion should clear up once this binge buying of Iron Ore abates or more new Capes are delivered from the ship-yards than the demand can absorb. Once one or both of these events take place, congestion will vanish very quickly with the BDI crashing down as quickly as it has advanced.

The fundamentals still overwhelmingly point to a world economic recession with tremendous job losses and we suspect that will put a real dampener on the current burning hot BDI.

Monday, June 8, 2009

STI technical chart analysis

There is no change in our technical view: We maintain a buy- on-pullback’ strategy. Expect the STI to pause for a breather (a rise towards 2450 is possible before pausing) in June following 3 months of gains that started in March this year but the major rising trend remains intact. We see near-term support at 2240 to 2300. Strong support is near the 200-day exponential moving average at 2095. Subsequent to this anticipated brief pause, STI should head for 2793 in coming months.

As at last week, the FSSTI has retraced 38% of its decline from 3905 to Oct 08’s low of 1477. The 38% retracement is the 2400 level. While the index breached the level on an intra-day basis, it had not closed above that level. The 38% retracement is the most significant resistance level since the index’s decline from 3905 and the least we expect is a 5% correction from the recent peak of 2424. The price oscillator index shows the index at an extremely overbought level. Based on that alone, we would advice readers to reduce beta plays and switch to defensive stocks. We had previously labelled the rebound off 2194 as a wave v of 3. We are still of the same view and expect profit taking to set in the coming week. Incidentally, the Hang Seng Index is also at a critical 38% retracement level and price action on that index will have a significant bearing on the FSSTI.

Most of the stocks that we recommended in mid-May, such as City Dev, Wing Tai, SGX, Yangzejiang and Straits Asia Resources had reached our target prices. Expect a pullback in these stocks along with the index.

Friday, June 5, 2009

STI time for correction?


Looks like we are in the last leg of this 3month rally.... few cents stocks are in play. Drawing this analogy to the top volume market as it stands, none of the top 10 stocks is above 10cts, none of the top15 stocks is above 15cts and only 1 of the top 20 stocks is above 20cts. Having noticed that, I think it's not that difficult to figure whether a boom or a crash is coming.

On the technical front, the STI has posted three dark candlesticks (closing below opening) at the upper Bollinger Band, which suggests of market fatigue.

This is not surprising as the technical indicators show that the market is extremely overbought and is poised to stage a correction; the RSI has just turned lower inside the overbought region, while the stochastic has staged a negative crossover inside the overbought region.

The MACD indicator (although remains pretty bullish) has just shown a negative divergence to the price action, which again reinforces the market fatigue angle.

As such, we are not ruling out a near-term pullback to at least 2240 (centerline of the Bollinger Band), or even 2100-2150 region (lower Bollinger Band and 30-day moving average), which we still consider as healthy (10% downside from here).

BDI's first decline after a long sharp rally since end-April. Short-term investors should lock in gains

The Baltic Dry Index (BDI), the barometer of spot dry bulk shipping freight rates, saw its first correction after a long sharp rally since 29 April. The BDI fell 5% last night to close at 4,093. Share prices of dry bulk shipping stocks synchronise closely with the BDI. Most dry bulk shipping stocks have doubled in the recent rally. I recommend short-term investors to lock in gains. The risk of vessel oversupply with the influx of newbuilds from 2H09 remains. Our fundamental view on the dry bulk shipping sector remains UNDERWEIGHT.

Thursday, June 4, 2009

Olam - Bearish doji star candlestick suggests likely near term correction


- Olam International could be poised for further correction in the near term with the formation of a high wave doji star candlestick on high volume at its 2-year downtrend resistance line, after rallying more than 45% in the last 2 weeks.

- With the RSI turning down again just under the overbought level, the Accumulation/Distribution indicator falling under its 3.5-month uptrend line and the ROC indicator signaling a sharp bearish reversal high up in the positive territory, these seem to suggest that the uptrend momentum is waning.

- We expect the stock to find initial support at $1.85 (2-month uptrend line), breaking which, we see the next support at $1.50 (resistance-turned- support level)

- Immediate resistance is pegged at $2.30 (2-year downtrend resistance line), ahead of $2.80 (gap zone in Jun ’08).

Wednesday, June 3, 2009

Raffles Education temporary target reached


RafflesEdu=$0.62 (TEMPORARY TARGET REACHED, SELL)

F&N one more push to reach target


F&N=$4.19 (one more push to reach our target at 4.34?)

Global equity technicals - Hitting major resistance


HANG SENG INDEX (potentially a Bearish Engulfing)

The DJIA's rally past its 8,600 double-top resistance early this week was not supported by higher trading volume. This is not a good sign. The DJIA may complete one more upleg towards 8,800-8,900 sometime this week before a long-overdue correction kicks in. Early this week, the MSCI Asia ex-Japan Index reached the crucial 401pt 38.2% FR of the 2007-08 decline. Most regional equity indices have almost tested or surpassed their 38.2% FR over the past week and are overdue for a correction. Their pullback yesterday could be an early sign of more correction in June. We believe the wave "B" bear market rally is not over yet. Assuming Asian markets do retreat in June, it should build the base for a final wave "c" upleg probably sometime in 3Q09.

Long-overdue HK market correction deepens in afternoon, with HSI now down 2.8% at 18,355.78. JPMorgan believes HK market currently due for correction, as trading volume appears to be at unsustainably high levels; still, believe cash levels remain high, investment funds seeing further inflows; "we are expecting a correction in the order of 5%-10%, not 15%-20%," JPM says. Based on today's intraday peak of 18,916.61, 5%-10% retreat would put HSI correction target at roughly 17,000-18,000.

Our near-term view was that STI should pause for a breather at 2353-2400 and the pullback should be mild with support at 2180-2240 before resuming its up trend to 2560. No change in view, although the index rose slightly above 2400 intra-day on Monday. STI could re-test or edge slightly above Monday’s high of 2424 before pausing. For the Dow, the next level to watch is the 9030 that is the 38.2% upward retracement level. Still, we maintain a buy-on-pullback strategy as the recent slew of economic data across the globe continues to support the ‘green shoots’ theory.

Foreigners are starting to purchase private homes in Singapore, this according to consultancy firm DTZ Research. A total of 117 caveats were lodged by foreign buyers in April compared to 174 for the 3 months during 1Q09. The 1Q figure is already an 11.5% increase from the 156 caveats that foreigners lodged in 4Q last year.

Singapore’s PMI expanded for the 1st time in 8 months as the index rose to 51.2. Electronics output, which had already bounced back into growth territory in April, maintained its strength, expanding for a second month in a row. The electronics PMI posted a reading of 52.9, up from 51.6 in April. Apart from Singapore, China and India have also recorded positive expansion in their PMIs. But the US PMI remains in contraction, although it shrank by less than expected last month, according to figures released on Monday.

Tuesday, June 2, 2009

CapitaRChina take some profit


CapitaRChina = $1.22 (Reached 2nd Target..take some profit)

Finally STI in red


Taking cue from the strong US stock performances, the STI kicked off the session strongly to break above the 2400 psychological and 38.2% Fibonacci retracement level at opening. However, it seemed that the index faced certain resistance at this level as it fluctuated above and below this level through the entire morning, suggesting that the market is uncertain of the strength of the rally in overcoming this resistance successfully.

On an intraday basis, we note that the intraday MACD indicator signaled a bearish crossover and is now heading down towards the centerline, while the intraday RSI has fallen below the overbought level. These suggest that the index could probably experience more downside potential in the afternoon session.

Will Rising Baltic Dry Index Keep Driving Cosco Up?

The Baltic Dry Index (BDI) is a measure of shipping costs for commodities,exceeding 3000 points for the first time since october, buoyed by Chinese demand for iron ore. The index tracking transport costs on international trade routes rose 222 points or 7.6% to 3164 points on 27 May 2009, leading the longest advance in two years.

Does the strong rebound in BDI beyond 3000, in tandem with the worldwide stock market rally, telling us that we have finally passed the worst of the downturn since the credit crisis began in late 2007 ? What are the implication for shipping and shipbuilding stocks like Cosco Singapore ? Shouldn't it be a good news for Shipping stocks?

Last week, Cosco share price gained 9 cents at $1.28 on strong traded volume of 79 million shares. This is in stark contrast to low trading volume and flat trading price pattern for the past few trading days. On the chart, we can see that big white candlestick breaks out of the SMA H(5), signalling it could possibly move higher to around $1.50 level, in line with the rising Straits Times Index (STI), which closed higher at 2329 level last week.

If STI is supported by 2300 level, we may see STI rising to 2500. In such scenario, Cosco share price will also move up higher in a steady uptrend. Afterall, the whole market is flooded with so much liquidity at a near zero U.S. interest rate.

Singapore Stock Index's Rally May Falter


DJ INDU AVERAGE=8,500 (Good chance to attempt its 200DMA at 8,867in coming days)


NIKKEI 225 INDEX (Crossed 200DMA today..the last in Asia to do so)

Back in Singapore, a three-month rally in Singapore's Straits Times Index may falter at the 2,390 level, triggering a decline in the city's equities, according to Fibonacci analysis of the benchmark index by DMG & Partners Securities Pte.

That level represents a 38.2 percent "Fibonacci retracement" from the index's more than five-year intraday low of 1,455 reached on March 9, James Lim, an analyst at DMG & Partners in Singapore, wrote in a note yesterday. The Straits Times Index rose 2.2 percent yesterday to 2,380.07, its highest closing level since Sept. 26.

The gauge looks due for "consolidation" after rallying 63 percent from the March low, Lim wrote. A Fibonacci analysis is based on a theory that signals advances or declines within certain percentage ranges between market highs and lows; for instance the Straits Times Index's high of 3,831.19 in October 2007 and its low point in March.

The Fibonacci percentages are based on the relationship between certain numbers in a sequence in which each number is the sum of the two figures preceding it. They are referred to as "levels of resistance." A stock breaking through a level may indicate a continuing trend while a possible stall is indicated by a failure to move through. Sell orders may be clustered at resistance levels.

China Milk - Bullish tweezers bottom pattern suggests likely near term rebound


China Milk Products Group may see more near-term upside in the days ahead following the double formation of a tweezers bottom and the harami pattern at the intersection of its 2.5-month uptrend line and key resistance- turned support level.

With both the RSI and MFI indicators signaling a rebound at the oversold level and the ROC indicator on the brink of a positive crossover following its recent sharp bullish reversal, these seem to support bargain hunting after the recent steep 2-week correction of 22%.

We expect the rebound to meet an initial resistance at $0.595 (1-year downtrend line and Oct ’08 high), breaking which, the next key resistance is at $0.715 (minor peaks in Jul – Aug ‘08)

Immediate support is meanwhile pegged at $0.445 (2.5-month uptrend line and key resistance-turned-support level), ahead of $0.36 (minor trough in Apr ‘09).

Monday, June 1, 2009

Olam target almost reached


Olam=2.16 (Target almost reached...take profit)

Yanlord - Reaches 3rd target take profit


Yanlord=$2.22 (3rd Target $2.17 reached, take profit)

Raffles Education is breaking trendline resistance


RafflesEdu=$0.545 (Breakout trendline resistance...heading towards 200DMA at $0.59)

Hyflux Water Trust - ready to sell


HyfluxWaterT=$0.525 (Reaching Target...ready to sell)