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.

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SIA - technically buy?

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.

SIA Engineering - Likely correction in the near-term

With the formation of a dark cloud cover (bearish) pattern just under its 6-month downtrend line and upper Bollinger band, SIA Engineering could befacing more correction pressure in the near term.

Technical indicators (Force Index, RSI and MACD histogram), which haveindicated bearish divergences to the price action, support our view that themomentum of the current rally is waning.

Should the reversal takes place, we expect the counter to find relativelystrong support at $1.80 (resistance-turned support level), followed by $1.73(minor gap in Mar ’09).

On the other hand, any upside from here will likely meet immediateresistance at around $1.99 (6-month downtrend line and minor peak inearly Apr ‘09), followed by $2.27 (Dec ’08 high).

SIA - Likely correction in the near term

After a strong 25% rally within a short 3 weeks, SIA looks to be facing some correction pressure as a hanging man bearish candlestick appears to be forming just under its 5-month downtrend resistance line signaled potential near term reversal.

Of the five times since Sep 2007 that SIA’s RSI crossed above 75%, its share price corrected thereafter. With a recent RSI high of 82%, there is a good likelihood that history could repeat itself with a potential share price downturn in the days ahead.

Should the share price correct from here, we expect a pullback to the immediate support at around $10.80 (resistance-turned-support level and 5-week uptrend line), and then to the next critical level at $10.00.

Any upside from the current level will likely meet resistance at $12.20 (2009 high), followed by $13.20 (Oct 2008 minor peak).

Technically sell SIA, Golden Agri, Wilmar

Technically…

Singapore Airlines (SIA SP; S$9.97 – SELL): Fallen below its consolidation triangle’s support and its 30-day SMA, suggesting that longer term downtrend has resumed. Could retest its October lows of S$9.05/S$8.83.

• The stock is fallen below its consolidation triangle’s support and also its 30-daySMA. This breakdown suggests that the longer term downtrend would likelyhave resumed.

• Indicators are looking negative with the RSI hooking downwards from a neutralposition. MACD has also maintained its negative stance and hence anyrebound would likely be weak.

• Maintain sell as any rebounds towards its resistance at S$11.00 and S$12.20should be seen as a selling opportunity. The stock could fall to retest itsOctober lows of S$9.05 and S$8.83 next.


Golden Agri-Resources (GGR SP; S$0.275 – SELL): Broke below its short term uptrend channel, suggesting that the longer term downtrend has resumed. S$0.26/S$0.21 could be tested soon.

• The stock broke below its short term uptrend channel yesterday and this is asign of weakness. The breakdown also suggests that the longer termdowntrend has resumed. Resistance is at S$0.30.

• Its MACD just confirmed its dead cross while RSI has hooked down afterfailing to climb above its trend line.

• S$0.26 and S$0.21 could be tested soon. Sell.


Wilmar International (WIL SP; S$2.89 – SELL): Tested its support turned resistance at S$3.10-3.14 but failed to close above it. This could cause further selling pressure and the stock could test the S$2.60/2.26 support.

• The stock tested its support turned resistance at S$3.10-3.14 but failed toclose above it. This would likely result in further selling pressure after fallingbelow its 30-day SMA (S$2.93).

• Indicators have just turned negative with the MACD confirming its negativecrossover.

• The stock would likely re-rate downwards to the next support at S$2.60 andS$2.26 respectively.



Fundamentally…

Lion Asiapac Limited (LAP SP; S$0.12 - HOLD): Excluding gains on sales of investments, 1H results were weak. The Company has announced restructuring of its electronics business which could see inventory and receivables write offs. We maintain HOLD with S$0.15 TP.

MAP Technology Hldgs Ltd (MAP SP; S$0.255 - SELL): Reported worse-than-expected 4Q but remains in net cash and has sustained its 1.77 US cts dividend (more than 10% dividend yield. We switch to P/BV valuation with S$0.195 TP. Downgrade from HOLD to SELL.