Weekend Analysis

What a boring week it has been! The STI has been ignoring movements in the US and HSI for the great part of the week. It could rebound high to close low, or begin low and rebound high to the 1700 level. Absolute sideways movement!

I have taken the 100% fibonacci to the previous low just to see if there’s anything interesting. Nothing much really. 1780 remains my upside target for now. Now what does a target imply? A price target is a good area for profit taking or for entry/exit. It can also imply a possible change in momentum. Now in this case, if the STI were to be able to recapture 1780 and holds above it, a major support turn resistance has been recaptured. It will be the first warning for traders to look out for their short positions. The tide may be changing.  If 1780 was hit and it never had the momentum to stay above, then 1780 remains as resistance which makes it a good entry for short. If it heads further down then one may decide to add more positions. On the other hand if 1680 cracks, then you know where the next possible support is. Are you going to go long at 1680 if it cracks? It would be a recommended no. The downside may have begun and if 1610 further cracks then you know the downward move is still in play  and the next ‘pitstop’ is 1535. Targets once again, may never be hit so don’t look at them religiously. They are guidelines and it is never a wrong thing to take profits along the way at these ‘pitstops’.  So where could we be heading next? With no gaps to fill in the immediate area,  we’re looking at a trading range between 1680-1780. It is a 100 point range, with moving averages all above and hence offering resistance. I will be looking at how the STI behaves if it manages to hover at 1750.  With such a strong close on the US markets on Friday despite lousy data, this could be a possibility. However in recent weeks the upmove has been severely weakned. To be frank, we could go either way. However some of my calculations does show that 1780 should be offering some strong resistance in the near term. Could it be in distribution mode?You do know what happens right? U get a flat or slight upmove and everyone jumps in. Guess what? What they jumped on was a whole sack of babies left by someone, which they will now carry.

Buy, hold or sell? From a trading perspective, we need clearer signals of a trend. The long term trend is definitely bear still but what is the next wave that may offer a trading opportunity? That is the question.  Wait for signs. Investing wise, I still feel there are loads of crap to surface. It is gonna take a while before the next bull can get on its way so I’d say if you have fully liquidated and sitting on cash, ready to pounce in, I would put around 20% of it in. At most. Personally, I wouldn’t. REITs are very attractive right now but you need to know decreasing DPUs (something which I said a year ago that will probably happen, when everyone was jumping into it due to good yields but has anyone wondered if the market is dead, that the REITs would be at depressed prices too? How to sell and ‘transfer’ to other stocks when you will be making a loss? REITs are not bonds you know..) and lower rental yields and valuations may ultimately affect their liquidity and DPUs for investors.

My bottom line? We should spend more time looking after our jobs and doing things well first. Bargain huting (either a 700 dollar 42-inch plasma tv or stocks) are secondary.  If you lose your job, does it matter that a blue chip is at $1? How do you invest without income? Worry bout income first EVEN if you missed the boat in the market. There will always be opportunities, if you know what to do on the market.

I am impressed with the US markets.  Truly am! Such lousy data and it has been trying to rally still. So what is happening? Let’s see. Similar trading range between 61.8-100%.  Supports have held, negating the downside move. A huge rebound on Friday which could see us testing the important 8375 level as resistance. After such a big move, it is not uncommon to see some consolidation. If any, a downside towards 8170 should offer mini support. It should be clearer by next week. If you do recall, I said last week that the rebound could occur right into Friday.  The resistance line is important at this point, so that we can more or less see if those who went in last week long, will end up as suckers, or will the shortists be squeezed out of an emerging upward move. At the moment, still bear. Until we see that resistance crack with confirmation, I am inclined to think that last week’s a trap.

Look at the Nasdaq! Aint it impressive? A higher low formed and it looks set to continue on a higher high streak, unlike the other indices where it has been sideways.

Take a closer peek however. Over a 3 month period. A symmetric triangle! Very close to its resistance now. What will it do? Head down, or bounce up and break out? To be frank, I don’t really know. The previous 2 highs had bullish indicators, but as we have seen of late it was not able to break to a higher high and head back down. I will have to watch this. It will be interesting. Not that I have any vested interest whatsoever and it doesn’t really mean a lot to us locally.  The market will decide very soon. This being a bear market, the downside always has the advantage.  Well we have 1 resistance trend line and a few MA supports now. Let’s see.  We could ding dong a little more here for a few more days to a week.

I did chart the HSI but I will just run through briefly since this post is getting a tad long. I am impressed at its strength too. The past week or so we had some up days and some down days.  On 29th Jan (when I got back) it gapped up and for the next 3 days it was heading down to gap cover. Gap covering has been completed and it bounced up on that support. That’s a bullish sign.  It has been rebounding since and yeah I think my HSI put is getting squeezed. Doesn’t help that it is expiring soon too. Oh well. Friday’s move actually covered a small gap resistance as well. Let’s see the market movement in the next few days.

One trade I went in short on Friday was SIA. I have been looking at it for a couple months now! It made some movement finally, with volume and on the downside. Will not be surprised if the support is re-captured hence I went in with 1 lot just to see. Could be a risky play due to cut loss point being far away. I will like to see how 10.80 behaves in the next few days. As a support, or a resistance.

I also took some profits off the table by covering half my UOB short on Friday, leaving the other half to fight. If the support seems to hold, I may cover the other one as well. However with the 20MA heading down fast and furious, what’s the hurry with closing anyway eh?

Capitaland rebounded back to close at the 2.36 support after being whacked below it for most part of Friday.

This week is gonna be interesting! Hopefully! But I am gonna be really busy at work.. grrrr

U guys take care meantime and trade safe!