Daily STI chart

Since i put up a daily chart of STI over the weekend, i thought i should update it. I am not sure if there is a mistake in the charting software, but yesterday's volume was HUGE! Momentum is coming down and stochastics is still in the overbought region (>80%). Looks like we are headed towards 1600.

Capitaland - The run up continues

The daily chart of Capitaland is still showing a strong uptrend after breaking through a resistance of $2.16. Last Thursday, it broke through another resistance level, $2.35, and on Friday, the price softened a bit to a low of $2.38 before settling at $2.42. I think a good trade for Capitaland would be to go long on weakness next week, with a stop slightly below $2.35 and a target price of $2.70. This price target is not obvious from the daily chart, but have a look at it weekly chart below:



Here, you can see that for six times from Oct08 to end 2008, the price of Capitaland tried but failed to break through the $2.70 mark, except the one time in the first week of Jan09 in which the price of Capitaland broke through, but only to plunge dismally and to close below the open of the previous week's open, forming a bearish engulfing pattern.

COSCO - An update

i was going through my blogs when i came across my short 'buy' note on Cosco. So i decided to look at the chart and to give an update. In my previous note, i commented that a buy signal was given when the MACD (moving average convergence divergence) lines crossed. i also noted that there was strong resistance at $0.775 and if the price was able to break out from this level, the next resistance (or target price for those going long) would be $0.905. After three failed attempts to breech $0.775, the price of COSCO retreated, formed a hammer on 20 Mar09 and finally burst through $0.775 on 23 Mar 09 on high volume. It looks like it is on the way to $0.905. What caught my eye as i was looking at the chart of COSCO is what looks like a 'dark cloud cover' on the 24 Mar 09. In this case, the peneration of the black (red) candle into the previous day's long white candle looks suspiciously like the 'dark cloud cover' formed by today's STI price action. But in this case, the peneration of the black candle is obviously less than half of the long white candle, so this should not be mistaken as a 'dark cloud cover'. The stochastics also show that COSCO is 'overbought', but i would be comfortable to hold a long position as the momentum, shown by the slope of the MACD lines and the increasing green bars of the MACD-H (histogram), is still positive.

Dark cloud cover? - STI

Let us take a look at the weekly chart of the STI. I was quite surprised by the strength of the uptrend of the STI this week. The STI started the week at 1608 and ended at 1745; a gain of 8.5%. Also this uptrend was on the back of high volume (compared with the volume of previous weeks). So the uptrend, from a middle term perspective, looks good and the STI appears headed towards 1926.


Let's have a look a the short term picture via the STI's daily chart. The outlook for the short term is not so certain. Today, the candlestick chart formed what look like a 'dark cloud cover' pattern. Such a formation occurs when the price opened higher after a long white (green here) candle but closes below the mid-point of the white candle. In this case, the mid point of the white candle is 1732. Today's index hit a low of 1729 but closed at 1745. So this is not quite a dark cloud cover if we follow its definition strictly. But i would still be a bit cautious next week. Previous support for the STI before it broke towards 1500 was around 1673. Its behavior around that level is quite important. If it is able to stay above this level, then that would give further weight to the uptrend, or at least, to consolidate for a while before pushing upwards. If not, then we may be headed towards 1570 again.

Some are saying that the STI is overbought and hence should reverse. So for this daily chart, I included a chart of its stochastics. On it are two parallel grey lines at the 20% and 80% mark (the scale on the right is in %). By definition, if the red line goes below the 20% line, it is (whatever the stochastic is measuring) oversold and if the red line goes above the 80% line, it is overbought. Overbought, as defined in Investopedia, is a situation in which the demand for a certain asset unjustifiably pushes the price of an underlying asset to levels that do not support the fundamentals. In technical analysis, this term describes a situation in which the price of a security has risen to such a degree - usually on high volume - that an oscillator has reached its upper bound. This is generally interpreted as a sign that the price of the asset is becoming overvalued and may experience a pullback. The STI certainly is in overbought territory. One trading technique is to go short when the stochastics dips below the 80% line. Another is to buy/sell when the stochastics cross each other. But it would be a mistake to go short simply when stochastics enter the overbought region. In a strong market (either rising or falling), stochastics can stay oversold or overbought for extended durations. Rule of thumb: Do not anticipate. Let the market lead.

Sorry, long story. Bottom line: The picture is mixed; for the middle term, the uptrend for the STI looks strong, while for the short term, it looks a bit uncertain. However, I do not think it would be wise to go short; a better strategy would be to go long on pullbacks.

A review of the STI

I was a bit disappointed when the DOW went down by 122 points on Friday. But, on a positive note, it was up for the week and has been up two weeks in a row - something it hasn't done for almost a year.

For the STI, what do we see? From the monthly chart, it appears that support at 1472 is pretty firm; the STI did go below that level in early March, but quickly bounced off. So at this point, it looks unlikely that we will head towards the 1200 level reached in 2003 unless the STI manages to close below 1472 on a monthly chart.

Let's have a look at the weekly chart:



STI's movement has been sideways and largely range bound between resistance of 1926 and support of 1472. Looking at the momentum of the STI, it does look likely that the STI will trade towards 1700 within the next 2-4 weeks. If it fails to close above 1700, it is likely to turn down and retest the 1570 level again. If it does manage to close above 1700, the next hurdle would be 1926. A close above 1926 would be very significant and i believe would signal the end of the bear market.

COSCO - ready to go?

Here is a daily chart of COSCO. A buy signal was triggered when the MACDs cut on the 13 Mar09. However, the price failed to break through resistance of $0.775. If it does, the target price is $0.905. Stop should be placed around $0.70.

Bullish divergence - Capitaland

I was very excited when i saw the bullish divergence chart pattern on the daily chart of Capitaland. Bullish divergence occurs when the price traces a lower low, ie $1.94 on 10 Feb and $1.70 on 3rd Mar 09, but the MACD traces a higher low instead. (See the trend lines in green. My trend line on the price is off. Sorry.). This shows that the bears are losing steam. A buy signal was given when the MACD lines crossed around 11 Mar09, around $1.99, target around $2.35, stop around $1.91.