Technical Analysis 14th Oct 2008

I promised Alvin that I will take a look at some of the charts, especially SPH so let’s see where it goes.

First let’s take a look at the STI and the DOW. Not too many noticable trendlines, so I am using fibonnaci and 20MA resistance as a guide.

For the STI, notice we are going into a gap resistance soon. I used fibonacci retracement and projection to find some levels. Green, for retracement, and blue for projection. These lines are drawn using the STI’s all time high, with the low set recently. I could use the levels set years ago but for now I prefer to use the current low to find where we could be heading. If the uptrend is persist, we should see a test of that 20MA average and that should come with a normal retracement.  I would prefer the gap support formed by the recent 2 day rally to hold, and any retracement should hopefully not breach 2107. So remember this level.  The gap resistance at 2250-2300 will hopefully be tested and break out for the upside if any. At the moment, my TP (note that target prices are a projection, not a definite) for the STI’s rebound if it holds, to be limited to 2910 which is a 50% rebound from the lows to the highs. Support, if our recent low is broken is around 1480. There are many resistances to clear and if they can indeed clear, I will be convinced of the strength of the rebound and will go long. We will look at the chart as it progresses. We did close with a bearish shooting star but there hasn’t really been much of a rebound to make it powerful. Let’s see how this builds. Whichever way it goes, remember, it would be best is 2107 holds, to show that the downside is hopefully capped for now.

The DOW is somewhat similar. In green, the fibonacci projection and in blue, the retracement. Yesterday’s climb has hit right into the first fibonacci resistance. Based on this, we could have a retracement. Are we having one now? I haven’t looked. Any retracement should hopefully not breach 8450. If the upside is confirmed, I have a TP of around 11028 for now. Remember, many resistances to clear first. Any upside must also retrace to form a higher low. As it forms hopefully I will be able to draw the trendline then we know the probability of the rebound’s sustainability. If the low does not hold and we crack all the way down, we could find some fibonacci support at 6390. Damn I hope we will never go there. I would like the 10400 level to be recaptured, and after it has I will feel more confident of the upside. Now, remember. TA is not about value. We do not care how ‘cheap’ or ‘expensive’ it is.  We do not gamble (well, we try not to) but rather to come up with a high probability of getting a trade right. If there isn’t and a posiiton is opened, it is risky and you must not commit more than a ‘tikam’ position. Remember! Position sizing! I spoke about position sizing in my other blog, so you may do a search there. The link is in the link library on the bottom right. By the way,  I am not fully convinced of the huge 10% rebound yesterday. My friends know that I said I would not be surprised if the dow climbed 1000 points in a day. Well it didn’t, but came close to it. The reason for my skeptism is due to the low volume. The dow is notorious for big climbs on low volume. Such moves must always come with confirmation.

SPH is what interests Alvin. I believe he may have drawn the same fibonacci lines.  You can see how beautifully the lines form, do they? You can even ignore looking at the historical support lines. Just draw the fibonacci lines. The catch is, you need to know how, and where to put the 0% and 100%. If you draw them correctly, you should see the candlesticks form nicely. You can draw short,mid or long term lines. It doesn’t matter.  If SPH can clear the gap resistance and breach 3.80 and confirm it, it would be nice and I will look for an interim TP of $4.15. If the low fails to hold,  we could go to $3.16. There are definitely resistance and support lines in between, but fibonacci will help find a target price. We don’t have very nice candles at the moment, but we are looking at $3.48 to hold. I know Alvin has a buy on it so I too, hope this level will be supported, and bounce off!

STE interests me today. Because I still hold a short position. There is a descending triangle and it has not broken yet. It tested it but bounced off.  Notice how today’s rebound tested the trendline? Will you wanna buy this stock now? I recommend that you do not.  Not unless that trendline is broken. See, people who don’t know may go in and buy and heck, buy right at the top maybe.  Very nice descending triangle. For people like me who are short on it, cut loss for me is at around $2.72 – $2.74. The height of the triangle is around 40c. Breaking it at $2.50 will have a TP of around $2.10. If you look at the fibonacci retracement, the support line is somewhere there too. Interesting? This counter should not be for someone who wanna buy, but for someone who is looking to short.

I also have a short on RESORTS on the KLCI. Same descending triangle, but it has since broke out of the triangle with a huge gap support now. It is now supported by 20MA as well. Doesn’t look good for me. If this move is confirmed, I will have to cut loss. Usually on breakout, the price will retrace back to test the line. Similarly, when the price breaks out like today on the STI, there is a high chance of it coming back down (investors here are known to be kan cheong spiders, and whoever bought at 9-9.30am may be regretting as they could have bought cheaper later. On hindsight yes. Panic buying and short covering resulted in the large jump probably. Some other stocks I came acoss and still on short include singtel. Bearish piercing candle today but really, the upmove has hardly gone underway yet making candlesticks a little weak. At the moment I am relying more on resistances and supports, as well as price action. I am waiting for a trendline to form and when it does, we can see better where we are heading.

It is still not a tradable period and I did close a lot of positions today (many of them at lousy prices hahah) but I was busy and I rather clear positions and wait on the side lines for a better opportunity.

Time for bed. I am tired and a lil high on good food and brandy. *hick*!