Technical Analysis – Jan 5th 2009

Hello! I am really tired out tonight after being out but I had a request for an analysis on CapitaLand so I will do one here.

A quick round up. I anticipated a consolidation on the US Markets after the huge move up. As it is, it has pulled back slightly. Noteworthy is that supports did not break. The breakout level was re-tested and it bounced off. Consolidation must come with lower volume to be healthy. I expect this to end by end of the week for the next move up from next Monday onwards.

Onto our local charts. Wow! Over 5% gains on VERY heavy volume. This almost seals out fate for the closing for this year in 12 months time. This is not to say, we cannot re-test major lows and possibly break them. I would expect this to occur in 1H at this point. Loads of foreign funds buying today. This is bullish, and many resistances were broken with gusto. Throw a stone anywhere and you’d probably hit one.

StraitsAsia seems good.  But has not turned bullish nor hit its TP yet.

WIlmar has broken out of its first fibonacci resistance. It looks poised for the next level but a small pullback will be nice. I will probably be looking at 3.27 to see how the price does there on a pullback and possibly accumulate more if it looks bullish. TP at the next level is 3.60.

My personal look on all these is to not chase the breakouts anymore. The risk reward becomes increasingly worse and worse. Look for pullbacks, monitor the support levels and accumulate there if it looks good. Many stocks open and MA support and went far higher without even a lower shadow. Wow! I would like to see STI re-test 1915 again. If it bounces off, all good. If it doesn’t I will sell all my STI call warrants away. The question people will ask here if 1915 cracks is, CAN SHORT OR NOT? Yes and no. Yes, but it is risky as you may be bucking against the uptrend (MACD above 0). No, because..why short in an uptrend? You short in a downtrend, long in an uptrend. Follow the  trend. When u buck the trend u take a higher risk. It is easy to understand isn’t it. So many stocks are bullish now. If one goes short, look for limited downside and be prepared to take profit if necessary. Else u may get hit with a tsunami when the market u turns for the upside.

At the moment, I would like to see a nice small pullback with low volume.  It will be nice if it lasts throughout the week even. That is ideal. Normally, ideal movement doesn’t quite pan out. Keep an eye on that 1915 level closely. I will expect that to hold for the next 2 weeks at least. I might be wrong though so we’ll see. I will watch carefully cause something is showing on my calculations at around Chinese New Year period. But let’s see how it goes within these 2 weeks as signals become clearer.

Everyone expects markets to rally into this Obama  thing and I think it could. But will it reverse? If so, when? That is the question, and that is where my calculations come in.

Bottom line, I am not looking to go long, till the breakout levels are re-tested on retracement. Long on retracement. Breakout chasers employ a different technique that I do not use cause I have other stuff to do during trading hours.

Okay here’s Capland. I looked across the board like Yanlord where I have long positions on. Yanlord lags behind Capland and has not broken out yet (1.10) but by doing so it has to get past 100MA first. Capland has gone way quicker and you’d see today’s opening price opened right at 100MA which turned out to be support. It also breached the next fibo level putting the next TP at 3.76. At current prices, there is limited upide. I do not like to buy at resistance.  Ideally, I wanna watch for a retracement back to 3.50. Ideally, 100MA supports 3.34 thereabouts now and would be a good entry if it does bounce off there.  If you notice the double bottom formation (W) which broke out at 3.27, it puts at least a 70c upside target price based on the W formation which puts the eventual TP at around 3.9 which is where the ultimate fibonacci level is. I would put a top at around there but for now it might head a little higher still based on volume and a nice white full candle.

My advice remains. Long on retracement if supports hold. Breakout chasing is dangerous cause if you don’t look at things the right way you may end up the sucker who went long right at the top before a u turn. If u must go long, employ cut loss points and focus on it strictly.  Your cut loss point now is still below 3.27. U could use 3.50 but u may be whipsawed out.  10c reward, with almost 30c risk, is not ideal at the moment. So if you are waiting to go long, wait for retracement. It will come. If it doesn’t come and the market rallies ridiculously high, it will favor a nice short position in time. To catch that nice big drop.  If you currrently have long positions, I will be looking to close half if it hits 3.76. Don’t be greedy.  As long as it doesn’t break below 3.50 it is okay to maintain current holdings.

That’s my piece for tonight. Hope it helps! It will be nice to see a healthy pull back with a big move up. If there isn’t, take the contrarian view and be careful.  I’ll post again soon. Drop me a note if you have questions!

Cheers all and have a great day ahead.

PS : S&P is at 930 at the moment, slightly in the red. Looks alright to me.