Tag Archives: descending triangle

Blue-chips in trouble

Evening all,

I have some words on the local market for today. After a fall starting in September, the STI has regained lost ground, and closed at 3350 on Friday. Two periods of rejection at this region in recent history mean that the STI is testing resistance now. When I look specifically at charts of the component stocks, I see more bearish-looking charts than bullish ones; and this was what I thought a few months back too – which makes me wonder how the STI managed to follow international indices higher. I want to share a few counters that have confirmed their mid-term sluggishness.

This is SIA Engineering – S59.SI. In my last post on this counter https://technicalanalysistalk.wordpress.com/2014/04/10/sia-engg-cruising-at-all-time-high/ – I mentioned my disappointment at SIA Engg failing at an all-time high, and prompted the chance of a downtrend emerging from a consolidation. SIA Engg traded in quite a volatile fashion from August to November before a decisive break down from the range (in black) in the middle of November. The sell-off put SIA Engg 10% below levels seen a few months back. Significantly, SIA Engg is now in a clear downtrend.

sia engg

Next, SembCorp Marine – S51.SI. In my last post on SembMar https://technicalanalysistalk.wordpress.com/2014/02/18/sembmarine-looking-bearish/ – I identified a huge descending triangle. True to theory, SembMar continued downwards. Based on the height of the pattern, SembMar is reaching its target. Incidentally, the downward target from the triangle is where a major low is: $3.10 region.

sem

Finally, ST Engg – S63.SI.

After coming out of a triangle in November of last year, ST Engg went range-bound for almost a year. In August of this year, ST Engg started sliding even lower. A sudden spike sent ST Engg to the 200-day MA but rejection kept the general downtrend intact. The recent sell-off is with heavy volume. The picture looks quite similar to SembMar’s. I see downtrends confirmed in these and other counters.

st

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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What is so good about gold?

Good day all,

Highlight of the past week for traders: turmoil in Ukraine gives the stock market jitters; while gold boasts its allure since the start of the year. (Of course, positive payroll figures on Friday is also quite significant). Equities have officially recovered from the slump at the end of January since prices have either breached highs – a full recovery – or climbed up near to levels seen in early January.

Gold has been making a stealthy ascent after a bearish showing last year. Last month’s trading saw gold edge into 1,300 territory – this level previously seen in November, 2013. In the chart below, you will see a few small to medium-sized patterns. The first pattern is a descending triangle. It is not the best triangle “on paper” since it has large spaces inside the triangle; however, you can identify where the bottom of the triangle – support – is at, and there are arguably three clear, lower highs. After a catastrophic collapse (if 10% does not warrant such a description, think about leveraged accounts), gold rose steadily to a high of just above 1,400. Then, the upward parallel channel was violated downwards, and gold formed a head and shoulders pattern. The right shoulder of the classic pattern is just outside the parallel channel. I have noticed such price action that links a channel with a head and shoulders pattern. After seeing many of such formations, my conclusion is that half the time the head and shoulders fails after a downward breakout – as in gold here; and the other half of the time the head and shoulders proves right and price continues further down after a breakout. This formation is difficult to trade because of the high chance of a whipsaw after the head and shoulders, but I still like to keep in mind how such formations pan out.

Gold2

All that is not so relevant to gold now; what is relevant is that gold just came out of an inverted head and shoulders and has made tracks northward. News of unrest in Ukraine triggered old prospects of gold heading much higher in the year ahead. I see no reason for gold to put on “glittery shades of 1,700 an ounce”. Gold declined significantly for the whole of last year, and it is now in a range. Simply put, gold is consolidating after a huge move. Until there is concrete sign of a bottom established in gold, I see a lacklustre year ahead for this commodity. Clear-cut resistance is at 1,400, where a previous mid-term high is at.

In the chart below, I included Fibonacci retracement levels taking the high as gold’s own all-time record at 1,900 (not exact in the chart), and the low as 1,000. I have had these levels on my chart of gold for several years. It is interesting to see that gold has been reactive to the 38.2% and 61.8% retracement levels. Currently, gold is consolidating in the region between 61.8% and 78.6%. The 78.6% level is not a popular level but my experience tells me that it is significant enough to be used.

Gold

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

SembMarine looking bearish

Evening one and all,

While browsing through my workstation, I briefly see many charts of local counters that look bearish. I reiterate my general bearish stance on most first-tier counters. The two weeks or so of trading have seen markets pushing higher but it looks more like a retracement from selling pressure to me. Property stocks were not left behind as they rallied a little. The more charts I look at, the more tempted I am to pull the trigger on the short side. I feel a little strange, to be honest, since the general mood I get from the media is not that bearish; so, I swiped out charts of international indices. True enough, the picture is not bad at all for stock indices of the western world – in fact, they look as healthy as ever. So, for whatever reasons there may be out there, the local bourse is not taking cue from global indices.

This is Sembmarine, S51.SI. After recovering from the US Debt downgrade crisis in 2011, Sembmarine traded with quite a lot of volatility. The price swings, in 2012, only managed lower highs while support was clear at the $4.20 region. From the start of 2012 until the start of this year, Sembmarine formed a very large descending triangle. A sharp drop in January of this year signalled a downward breakout from the huge triangle. Overall, the chart of Sembmarine looks very bearish. I will be looking at short set-ups based on the general downtrend and large pattern.

s51

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

 

Property stocks look set to fall

Evening all,

Today, I want to talk about the property sector of the local stock market. I mentioned earlier in the year that the property stocks look quite bearish in general. After browsing through all the charts of counters in the property sector, my stand has not changed: not only are the big developers looking downright bearish, most of the smaller-cap ones look not much different. REITS retraced from their surge after the 2008-2009 crisis, and are now flat – they have lost their lustre. If you think about it from the fundamental side, it is no surprise that property stocks are not looking bullish at all; what with the multiple attempts by the government to cool down the en bloc fever and accelerated increase in property prices in recent history.

For REITS, my approach has not changed – I consider what yield the market demands from REITS. For now, the market has definitely found a comfortable level to price most of the REITS, so I do not see any catalyst for REITS to move substantially in any direction.

CapitaLand, C31.SI, had clearly turned bearish (around two weeks ago) in the short-term because of a break of an important support level at about $2.93. Longer-term trend indicators like the 200-day MA and 50- and 200-week MAs are downright bearish. I see a good chance for some buying pressure to inch CapitaLand up but the I will adopt the “sell the rallies” mentality for trend plays.

C31

Wing Tai performed quite spectacularly from 2012 through 2013; however, a downward break of the 200-day MA late last year sent Wing Tai falling by more than 15%. The recent slide initiates the downtrend that Wing Tai is in now; as such, there will be trend set-ups on the short side.

wt

In the few charts, I show a few more counters that I will be watching in the weeks ahead.

s30

 

u14

k17

 

 

 

 

Pattern failure on Biosensors?

Evening all,

Today I have a chart of Biosensors, B20.SI.

In my last post, I identified a large head and shoulders in the chart of B20.SI. Coming on the heels of a long uptrend, it seemed like a perfect set-up for the end of the uptrend. Soon after my post, Biosensors made a false breakout towards the downside (circled in red below). Fortunately for me, I was patient in entry, so I did not get in when Biosensors staged a sharp reversal.

biosen

Biosensors then shot up by 25% to $1.40, which is where the bottom of the head is. I deduced that a head test should be the next event on the chart since the reversal from the false breakout was so strong. Alas, $1.42 stayed as the high for biosensors this year. What do you do when patterns perform like that?

Trading Biosensors for trend set-ups would have been painful and frustrating. The solution seems to be the commonsensical one of stopping and taking a break during a whipsaw period. For now, I have to take the large head and shoulders off. It is not often that patterns behave like that. And even if false breakouts occur, they end up being a busted pattern. That means that direction to trade is the opposite of what it was before. I remember reading a quote somewhere along the lines of this: good traders get stopped out, great traders reverse their position totally.

Right now, I am seeing another pattern on the chart of Biosensors. A distinct descending triangle has emerged. Strictly speaking, Biosensors broke out towards the downside on Wednesday but price managed to rise back into the triangle. The market knows there is an important level at $1.19. That level proved to be good support until Wednesday’s pierce. In retrospect, traders were testing a break of $1.19, which filed as Biosensors climbed back up to close at $1.90 n Friday. The week ahead will give us better indication if this descending triangle results in a breakout upwards or downwards. Remember, all triangles can break out towards either side – always wait for the chart to give indication.

biosnes

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

IndoAgri past the point of no return

Good day to all,

Hope you are all having a good weekend. I will get straight down to business here. This is IndoAgri, 5JS.SI.

I covered this counter several times in the past. In my last post, IndoAgri posted a bearish pattern on the chart and price tumbled significantly. For quite a long time – throughout the whole of 2012 – IndoAgri found itself in choppy waters with a clear support at about $1.15. In April of this year, IndoAgri broke through the strong support level. Also, you can make out a triangular pattern of some sort because of the consolidation last year. It will be considered a very large triangle, and volume is not perfect. I will not trade it as a pattern play, but I think at this juncture, it is quite clear that I am a bear on IndoAgri.

One characteristic I have noticed about local counters is this: after the recovery from 2008-2009 lows, a stock may go on a long run-up. Then, the tide changes for the reasons that may be, and the stock starts selling down. Halfway down, the stock may find a period of consolidation. From here, either the stock gets ready for a move back up to post-crash highs or it will languish and drift down towards crash lows. Breaking down past $1.15 signals the point of no return for IndoAgri, as such, I sound out the bearish alarm once again.

IndoAgri

 

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

 

Stocks forming a base

Good day all,

Bernanke has spoken, and now the much anticipated – and expected – “quantitative easing 3” is confirmed. EURUSD flew skywards (managed to grab some pips there), gold continued higher as well, and of course, stock indices surged up. Chart-wise, all these assets look more bullish, though it will be wiser to wait for pullbacks for longer-term trades. For today, however, I will be looking at some local counters that have been “forgotten” by the market in the last year or so.

  

All these charts look similar to me. These counters started getting hammered about 2 years back. It was only several months ago that the market decided these stocks have been battered enough, and a clear support zone emerged. These stocks continued to swing, but generally we see them as consolidating after a major trending phase. One technical indication of this floor is the proximity of the 50-day MA to the 200-day MA, and how they seem to be converging.

The conclusion I have come to is that these stocks are building a solid base. So, the ultimate question in our minds: up or down? As a breakout trader/trend follower, I always wait for the move before reacting. Which means to say, while I am favouring the bullish side, I have no choice but to wait for confirmation. In Noble’s case, the recent uptick has caught my attention. Look at the chart above again, I drew trendlines that suggest a possible upward breakout from a descending triangle.

As the months pass, I will continue to look out for stocks forming a base. These are stocks I will keep in view (kiv) for longer-term trend trades.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Triangles in Osim and Pac Andes

Hello all,

I have two triangles today – Osim and Pac Andes. Osim’s triangle does not have ideal volume behaviour but price action is good enough to qualify it an ascending triangle. We have a downward breakout with no volume either. So those who like volume as confirmation will not see this as an ascending triangle with a downward breakout. Price retraced up to $1.22 from a post-breakout low of $1.105. Any failure at the 200-day MA will entice me totrade Osim down to below $1.00.

Pac Andes’s triangle has good volume behaviour, but it looks a little immature. If you look at the triangle I drew below, price shot up with some room to spare before the apex of the triangle. On some occasions, price will fall back down before resuming upward trajectory.

Overall, these two triangles are not ideal, but it will be good to put them in observation.

 

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

M1’s triangle

Good day all,

Looks like the last few triangles posted here have worked well. Yangzijiang continued on to the target, and the USDSGD pair is trading lower. Today, I have another triangle to show you all. M1 has broken out of a descending triangle. Looking at price and volume alone, this triangle is just about picture perfect. M1 retraced from highs of $2.68 to make lower highs. At the same time, though, M1 found support at about $2.36 to $2.40. Volume behaviour is fantastic. In fact, I have not seen such volume accompanying a triangle pattern in a long time. Volume decreases as the triangle takes shape, and on breakout days, it surges above the 30-day volume MA. Honestly, volume there could have been better, nevertheless it is still acceptable. So, these all point to an upward breakout from a descending triangle.

M1 rallied up to $2.56 before dropping straight back down to the $2.42 region. If I were long M1, this would be very disappointing. So how do I see such patterns in light of a breakout that looks invalid? Considering how M1 is still above the triangle support at $2.40, the case for upside is still valid. But, if M1 falls below the support, things could look nasty. What we would be looking at from a technical standpoint is a busted descending triangle. What we should expect from that is downside; and by taking the height of the triangle for projection, we are looking $2.10 – $2.15 for M1. I have not had much experience in busted triangles, since they do not happen many times (and thank goodness for that, if not we can start looking at all triangles as busted ones), so I will just monitor M1’s price action and regard it as an observation.

Looking at indicators, during the breakout period, quite a number of indicators showed bearish divergance indications. While M1 rallied to $2.56, indicators did not make higher highs. So, with hindsight, we can say that the indicators did not like M1’s breakout towards the upside. With that, let’s continue watching M1 and see if a new surge appears, or a busted/invalid triangle prevail.

 

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

F&N nearing major support

Hey all,

I took a look at F&N’s chart today after hearing people talk about F&N getting a better grip on Singapore’s food and beverage industry.

From a technical standpoint, I cannot say I am very enthusiastic about F&N’s share price chart. In the chart below, you will see a red downward parallel channel. Although my performance for upward parallel channels is not good, many downward channels I see work very well – in other words, share price continues to drop further, as this chart pattern entails. Moreover, F&N is now below the 200-day moving average. From these two points alone, I cannot be a bull on such a stock.

Before tagging a sell call on F&N, the chart does tell me that F&N is at an important level now. I took out fibonacci retracement study, and the 23.6% support level -$5.40 – has been tested 3 times already. Price is not far from this support level now. The first thing I think of when I see this strong support level is that price must hold this level if it wants to continue higher. On the other hand, I am looking for such a strong support zone to be violated because of the bearish channel in place. Once $5.40 is taken out for good, I see F&N trading all the way down to the 38.2% level at $4.70. This is also near where the 200-week MA will be.

Finally, in the second chart below, you will see two brown trendlines depicting a triangular chart pattern. Depending on how you draw your trendlines, it may be descending, it may be symmetrical. Whichever way it is, declining volume does confirm it as a triangle. I do not really like price action inside the trendlines, especially the start of the triangle where there is too much “white space”. Anyway, the recent consolidation does mean F&N will be making a big move soon. Let us see how this goes.

    

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.