Technical Analysis – 28th April 2009

Swine flu continues its work around the world and it is quite interesting that markets are heading down there hasn’t been any panic selling. The panic selling in SIA seems to have subsided while banking stocks took a tech rebound despite the STI closing in the red. Not a lot of volume as well and this has to be respected.

The STI confirmed its new 20MA resistance today and although it dipped well below the 1800 just after lunch, a rebound took it to close above 1800. I can attribute it to analyst after analyst giving support of the STI at 1800, making this a crticial support area. The 1800 level has been breached for the second day running now and you’d see that the level has been weakening somewhat as the buyers at the 1800 level have been more or less taken out. I am not optimistic for the upside and any should be capped at 1830 and could go well with a short position with a cut loss at 20MA (1835) and 1855.  Levels to look for if 1800 breaks is the next one at 1760. The bearish divergence seems to be coming into fruition still.

I witnessed capitaland’s ferocious fight between the bulls and the bears at the 2.40 level was taken out but rebounded to close above 2.42. Wow! If this is taken out watch for 2.31 as a support on the MA and I will likely take profits there and await a possible rebound off there before deciding what to do thereafter.

Jay went in with Sembcorp for me. The short position was put in at 2.54 although the price rebounded to close a little higher. 20MA support turn resistance needs to be confirmed  and the 2.54 level taken out for more downside. I also noticed SPC has turned long only as well.

This will be a short trading week for us and I seem to observe, this break will be a good one for everyone. If I weren’t ‘forced’ to participate, I would have stuck out and gone in this week only.

Oil stocks seem to be in play still looking at the BBs churning IndoAgri amongst other oil stocks probably. Financials are not in play yet althoug they might soon.  The swine flu probably took a lot of people by surprise but the market has been holding pretty well, with selling pretty well absorbed.

With the month of May coming in, and the swine flu in its infancy age, I’d reckon that it would be better for investors to await better levels for entry.  The bears, will be awaiting at the top for entry so every rebound is their opportunity.

What am I looking for?  For a proper rebound to occur and retrace again, confirming the formation of a lower high which is the first proper indicator that the trend has changed. MACD lines will eventually start coming down towards zero and a crack below will provide signals that going long other than for short and quick profit taking zones would not be a very good idea from a trading point of view.

I will return tomorrow morning if there’s an interesting observation.

As always, trade safe!