Techncial Analysis – 28th Oct 2008

Hi folks. Back from Bintan, all burnt and all. The market opened up much redder than the color of my skin but it did stage a pretty strong rebound to close positive, tracking gains in regional bourses HSI and Nikkei.

Europe and US futures went sharply green on seeing that Asian bourses were rallying. When was the last time you saw them being led by Asia? It does tell you how much a tech rebounded is needed, and the market will find anything to stage a rebound. The question is, where do we go from here? We all know where we were, but what about tomorrow? That’s the million dollar question.

Many counters have come back with a bullish piercing pattern. Here’s an example of a bullish pierce, UOB. The current candlestick pierces through the previous black one from a preceding downtrend. Bullish. And requires confirmation. You will see it on many blue chips as well as on the STI.

So here’s the STI. Chart is not out yet so I drew it on my own. Nice pierce. People asked me, when will it become a period to go long? See where my arrow is? When a higher high is formed. Look at where the STI opened today, right on the trendline support. It has not cracked that particular line. What’s my outlook? I will expect the STI to rest that 20MA at some point. By the next couple months. What happens thereafter, we’ll see. One thing we do not want to see is a break below that trendline support. If we do, we need to look for confirmation to see if the following trading day recaptures the support.

Starhub, our darling for today. I did a trade for bummy, and I did a trade for my mei mei. I felt this has a good probability trade so let’s see how it goes. Both have done their risk reward and I did get some lots for myself too. So you’ll see that it is on support. Cut loss on the upside is around $2.22 which is around 22c risk. A break below current levels, well you can see the next 2 fibonacci supports. Price action is bearish, and confirmation will come on the crack of support. Remember it must close below. A pierce through intraday = no count. I will be watching this one carefully.

Singtel is interesting so  I am gonna talk more bout it.  First of all, observe the third gap created as indicated. In TA, this is known as an exhausion gap and has a very high probability of closing. This is also true for a rising gap for upsides. So expect exhausion gaps to be covered in double quick time from its creation. Look at the amazing candle formed today. The STI was largely boosted by Singtel, giving it some 36 points plus alone.  So I drew a zone, in red line, to find where my profit taking zone will be.  The previous high was $2.70 so I have put a line there. Now I need confirmation so I did a fibonacci projection (upwards), and look at where today’s price stopped at. Exactly at the fibonacci resistance. Amazing?  In 1 single session it managed to fight all the way to 1 level. Weak level, so let’s see the next level 38.2% and it is right where $2.70 is. That CONFIRMS that this is a strong profit taking point. If it doesn’t hit that level, there won’t be any reason to close the position. So this is how I dictate my levels to cut loss or profit take. Please feel free to develop your own comfort zone. The above is purely for ‘teaching’ purposes. 1 huge engulfing candle covering 2 black candles, on high volume.  This one has to be watched.

I’m tired.. gonna head home, have my dinner, nurse my burnt skin and watch CSI

HSI did a super mega rebound today, basically covering yesterday’s big loss. There is loads more to cover but it is a good start. Let’s look at the momentum. The feds are gonna say something. Market expects a 50bp rate cut. Will they get it?

Have a wonderful evening all!