SINGAPORE (Sept 8): Here are the charts for technical analysis this week:
Straits Times Index (daily)
The Straits Times Index (3,228) closed below the 100-day moving average (currently at 3,246) on Friday. It had fallen below the 50-day moving average Aug 17 at 3,271, before whipsawing, and finally sinking well below this level by Sept 4.
Almost simultaneously, quarterly momentum which had formed a series of negative divergences with the STI for the past four months, has finally dipped below its equilibrium line. ADX has turned up as the DIs are in negative position, further confirming medium term weakness in the market.
STI Index (weekly)
Raw annual momentum continues to falter and could fall below its own moving average which in turn has flattened. If these two components turn down, the STI is likely to be in for a severe downturn. The market is being held up by the 24-month momentum whichremains in a rising trend, and the 200-day moving average is also intact.
A deeper correction had already been indicated when the STI was unable to hold above a relatively strong support area at 3,265 to 3,270. The next important support appears at the 3,200 to 3,208 range. Prices could bounce off this level to complete a top formation. This could coincide with an upturn in short term stochastics but this indicator is unlikely to have much force as quarterly momentum breaks down.
Hot and cold stocks
Singapore Press Holdings ($2.74)
Attempting to bottom
This counter has been an underperformer for this year, declining down by more than 25%. Now as outperformers and the market in general gets ready for a downturn, this counter is attempting to bottom.
The first sign is declining volume as prices fall, suggesting that selling pressure is beginning to dry up. A series of positive divergences have formed between price and 21-day RSI, and now, positive divergences are forming between price and quarterly momentum. It is still too early to call a final bottom, but prices are starting a bottoming process. Quarterly momentum may have bottomed. Immediate support is at $2.70-$2.71.
Yangzijiang Shipbuilding ($1.41)
Peaking process
At their highs, prices had more than doubled, and they are still up 80% since the start of the year. Yet, the technical outlook has deteriorated.
The huge volume on Aug 31 and Sept 4 coupled with two black shaven bottoms on the candlestick chart indicates selling pressure. Quarterly momentum fell after a negative divergence. Stochastics and 21-day RSI are falling, Annual momentum remains intact, but prices are showing signs of weakness. Support/breakdown is at $1.29. By then prices would have fallen below 50-day and 100-day moving averages. Resistance is at $1.44. Current moves are likely to be part of a top formation where the indicators are giving advance signs of weakness.
