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STI: Marching in place in March?

Sunday, February 28, 2010

TA is not about predicting price movements.  TA always presents two possible scenarios.  To most people, this immediately means it's as good as not saying anything.  Well, if we had a tool that could tell us if a security was definitely moving up or down, ..............; you fill in the blanks.

Then, why do we still have TA?  Well, knowing the trends, supports and resistance levels could help us make certain decisions when certain numbers are hit.  Is that it?  I am probably not doing the subject justice but for my purpose, in a nutshell, yes.

OK, on to what you are waiting for.  What do I see in STI's charts?



On the daily chart, we see that the MFI is clearly downtrending with lower highs and lower lows.  The stochastics is turning down from the boundary of the overbought region.  These are momentum oscillators and their current patterns indicate weakening buying momentum in the near term.

That the STI re-entered its uptrending channel is quite obvious and it is currently supported by the upturning 20dMA.  This is a positive.  That the rising 100dMA was taken out a few sessions ago suggests that this is not a strong resistance.  Instead, the resistance to watch would be the 50dMA which is still descending, albeit gently, and is at 2,813.  Immediate support is at 2,737.  In case of a breakdown, a stronger support is provided by the rising 200dMA at 2,615. 



If we look at the weekly chart which presents a longer term picture, we see the stochastics upturning.  This is quite different from what we get in the daily chart.  What does this mean?  To me, it means that the probability of a large downward movement in the index is low over the longer term.  The STI has weakened but is showing resilience and is more likely to move sideways for a while than to decline dramatically. 

The bearish divergence observed between index value and volume up to two months ago was corrected as the index retreated for three consecutive weeks accompanied by increased volume.  Subsequent black candle weeks were on lower volumes.  This supports the view that the STI is less likely to decline dramatically.

Remember, technical analysis provides probabilities and not certainties.  Good luck to us all in the month of March.

4 comments:

Hubert wee said...

The STI could potentially remain in a tight range for a while. Volumes are still very low, and I don't see a sustainable uptrend unless volume picks up. At this point, there are still quite a lot of possibilities..

AK71 said...

Hi Hubert,

Yes, that is generally my expectation for the STI. Hence, the title of my post: "STI: Marching in place in March?" ;)

CL said...

Healthway FULL YEAR RESULTS * FINANCIAL STATEMENT
is out.

The directors intend to recommend a final dividend of 0.12 cents per share.

AK71 said...

Hi CL,

Thanks for sharing the good news. That is nice to have but I suppose they will be offering scrip dividend as an option again to help conserve cash. In the past, I opted for scrip dividend. I might opt for cash this time round.

I zoomed in on the EPS figure which reduced from 1.32c per share (end Dec 08) to 1.12c per share (end Dec 09). This figure is telling as it is one of the ways I arrive at the fair value of a company's shares.

Even though the revenue and profits have improved impressively by 21.8% and 59.5% respectively, year on year, EPS is still being diluted at a faster rate with all the new shares being issued.

So, the updated valuation I did on 24 Feb here in my blog for Healthway Medical is valid, together with all my concerns.

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