DBS - An update

I have not commented about DBS for about 2 weeks, so i thought i should write a little about it now. In my last commentary, i showed a monthly chart and mentioned that a hammer was forming, but that i was not sure as i had to wait til the end of th month to be sure. It is now a little past Mar09, and while Mar09's candlestick is not exactly a hammer as it has an upper shadow, nontheless, it is a bullish candlestick signal with its long lower shadow and a close above the middle of the previous month's candle.



Looking at the weekly chart, DBS appears to be a stuck just below the $9.20 level. Since the weekly trend is up, i would suggest buying DBS on price weakness. A breakout above $9.20 should see the price heading towards the $10.30 level.

STI - Elliot Wave

Today i watched a video in which a guy fits Elliot Waves into an S&P500 weekly chart. He managed to fit three waves and mentioned that the S&P500 is currently on the fourth upwave and that the fifth wave down will take the S&P500 to the 500-point level. (It is currently at 842). For this view to be invalidated, the S&P500 needs to trade above 930 (or around there). I wonder if this is the case for the STI. I pulled up the STI weekly chart and drew in what i think are the major up and down waves. (The lines are in thick yellow). Voila! I managed to draw five waves!; three major down waves and two minor counter trend waves. (If i read Elliot Waves correctly, the theory says that a major trend consists of five waves; three in the direction of the major trend and two counter trend waves. Thereafter, a reversal?) According to what i managed to draw, the STI completed its five waves down and is time for it to rally. Really?

Maybe some people will draw the waves differently and conclude that we are only at wave four. i suppose they are, or maybe were, busy shorting the market at every rally, hoping to be early in catching the major fifth wave down, but finding themselves caught at the wrong side of the trade and having to close their short positions. I believe this is one of the reasons that this 'rally' that we are seeing since early March is so strong. People who went short discover to their horror that the market is racing ahead and so they close their short position by going long. People at the side watching the market roaring ahead cannot stand waiting at the sidelines anymore, and so they too jump in and go long, thus adding more fuel to the 'rally'.

Be wary of people hyping up the current market conditions by saying that this is a bear market rally, or that we are only at the forth leg of Elliot wave and that a major fifth wave down is coming, or that we are now in an 'overbought' situation and that a correction is imminent. Look at the chart objectively and as far as possible, go with the trend. Of course you may trade counter trend, but you need to be much more nimble in getting out when the trade goes agains you.

Daily STI - revised

Grr...This morning's STI chart really confused me. Down day on high volume means that the trend is very likely to continue. So i was very puzzled by the little rally we are seeing across Asian markets now. I had another look at the STI daily charts and i was a little comforted that the huge volume i saw this morning was some data error.

Yesterday's down day was on light volume. Unpleasant for those caught on the wrong side of the market, but it means that people are taking profit; not selling down. From what i can see at mid-day, there seems to be good support at 1676. No doubt the STI closed below that yesterday, but it bounced off that level today and appears to be holding well. MACD and stochastics are both declining, so what to make of them? Well, the STI, based on the weekly chart is still on an uptrend, but looks like is taking a breather.

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.