Technical Analysis – Weekend review

Good morning everyone! I had a pretty good weekend. Movies, board games, chats and drinking. Excellent stuff and I hope everyone had a great time too!

Let’s do a brief look at things before I turn in. The DJIA is currently at 123.6% fibonnaci support. The index is extremely oversold and a rebound is very likely, towards a technical max upside towards 7550. It could be capped at 7450, or it may not even get up there in the near term but I am thinking a nice rebound could be in the works, before another wash down to create new lows. March is likely to bring somemore downside amongst major bourses as the market focusses on the economy now that the reporting season is somewhat over. The downward move on the US DJIA is likely to go below the 7000 mark. The S&P has in fact closed somewhat marginally below it’s last low and is likely to see a tech rebound. However I must stress there is no stopping it from heading down further towards its next fibonnaci support. The high volume seen on the selldown on Fri also favors the technical rebound.

The downward move is also expected on the STI which may not follow any upside movement on the US bourses, preferring to mirror the HSI instead. The STI alone has been very weak following a slew of very bad news, from news on GIC’s investment portfolio, to the contraction expected this year. Short signals have appeared and the buying support at 1580 was utilized on 23rd Feb and we sorta closed somewhat near that level again on pretty decent volume. It does imply that 1580 is a weak support now and is not likely to hold very long. The next expected support is at 1470 while 1630 remains as immediate key resistance.  My estimate for any upside to be capped at 1650 is still in play and with the 20MA resistance heading down, any chance of hit testing that resistance will be a great place to go short. 50MA has also begin to turn down from heading sideways. Rebounds will not be unexpected, but be aware of limited upside due to multiple strong resistances above, with a weak support where it is at currently.

I also like the plays in StraitsAsia, Cosco, SIA, ST Eng etc. SIA and Capitaland (where I have entered short) rebounded to close above support levels on Friday after trading below for most of the session. That is what I call a kelong closing!  The bid spread for UOB since it has dived to being a single digit is not 10c a bid only, not favorable to traders.  The sell down after UOB reported showed that the downside did not factor in news and the banks all traded lower alongside thereafter, with OCBC and DBS joining the sell off. DBS has now hit the next support and OCBS is testing its next already so both are not good short plays, till a rebound occurs. I will locate these levels in the next chart analysis.

I am waiting patiently for SIA to crack 9.80 before adding more short positions with the next support at 9.20, offering a very good risk reward.

The bottom line? Markets are extremely oversold, requires a tech rebound and in any case, a good rebound is excellent entry point for shorts. One point to observe, the fiercer and quicker the rebound, the faster it could come tumbling and the better the trade.

Put warrants are terrible now. I entered a HSI put for April and even that is actually not a very ideal put but it was the best of the lot already.

It should be a bumpy March. Hang in tight! Will wave 2 appear, or will wave 1 continue? From the looks of it at the moment, the latter scenario is more likely.