Technical Analysis – 16th April

I had a text message from Koori to do a TA on OCBC and I will in a while.

But since I am at it here, let’s look at the STI.

So what happened? You’ll see pretty clearly it has met with somewhat a major resistance, created in Jan 2009. Re-tested it and pulled back. Fairly normal activity. You wouldn’t expect it to simply close above would u? So if it does pull back where could we find support? I saw a gap support as seen in blue shade. I took my fibonacci to a a higher low to see if the gap fill could be a major support. Turns out, gap fill area is a 38.2% retracement from the current top.  That should offer some support, thereafter at 1800. If it does turn around at either level we will still have a higher low, which is bullish.  On the high side, 1960 breakout should see the STI testing its 200MA resistance and I would say, this is where the rally is likely to end, if it ever goes that far.

So 1830 support, 1945 and 1960 as resistance. Any turn around before 1830 is of course, pretty bullish but we have to follow closely. The odds are for a retracement, as bearish divergences is still in play. In fact in the short-mid term I will expect financials to take another hit down quite hard. I don’t know when yet, but I am pretty certain it will happen. If you are on the long side, do not stay greedy for too long.

Here’s OCBC.  I used 100% at the major resistance (now turned support) to find a TP for the upside.  Generally you will recall I like to see a 61.8% breakout rally for a strong bull trend. It tested that today and pulled backwards.  With 200MA hovering very near above,  a short trade on 5.80 breaking would be nice.  Watch for a very small gap support at the 123.6% level and if the bull is still intact, that level should offer good support. So yes, I feel the bias is on the side of going short.

UOB as an illustration, obvious bearish divergence. It has far underperformed OCBC.. in comparison, with UOB’s 200MA at $14, way above.  I wouldn’t be holding onto long positions on this for long.

SGX will also be a good short play if $6.20 gives way. I think 5.80 should provide good support in the interim.

So bottom line is, bearish divergences can come into play, anytime. This is not good for the long side. That view will be voided if the STI breaks 1960. I must warn however, the next major resistance is not too far away so the recommendation is to sell on the rebound.