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SPH: Waiting for elusive $4.20.

Tuesday, September 7, 2010

On 1 Sep, I mentioned "if SPH does retest $4.20, I expect that to be a strong resistance as many who missed selling then would sell now.  So, I would sell some at $4.20 and buy back if price retraces to the 20dMA."

I reckon that many investors and traders are able to read charts and many know that SPH's resistance is at $4.20. When too many people anticipate something happening, then the event might not take place. Market participants are wary of buying too close to $4.20 as they recognise that as buying close to resistance.  Market participants waiting to sell at $4.20 might sell at a few bids lower just in case the resistance does not get retested.  In such a scenario, we need a day or two of massive buy ups to clear all the doubt and suspicions surrounding the major resistance.  In this case, it is $4.20.  How likely is this? Your guess is as good as mine.

Technically, it is easy to spot a short term negative divergence between price and volume. This probably explains the weak push upward in price as volume is the fuel that drives rallies. Today, the MACD histogram turned red.  This is a warning that price could face more downward pressure in the near future. The MFI and RSI are rising strongly into overbought territory and such overbought situations could not last too long, normally. Notice how the rising OBV is much gentler in its gradient in recent sessions.  Although there is no distribution, accumulation is slowing down.

Should we panic? Should we sell? The uptrend is still intact.  I want to draw your attention to the orange color trend line support I have drawn.  This would approximate $4.10 soon.  You want to also take a look at $4.13.  This looks like a natural support level and should serve as immediate support but, of course, it needs confirmation.  I expect some semblance of support between $4.13 and the orange color trend line support in the immediate term.  If these supports break,  look to the individual rising daily MAs for the next supports.

Related post:
SPH: Another white candle.


JT said...

Hi AK,

4.20 may be a strong resistance, but given the potential 0.18-0.19 div coming next month, think even if it pullbacks, it will be well supported. Hence, personally, I think the risk-reward proposition does not reward selling at 4.20, unless there's a big pullback underway.

AK71 said...

Hi JT,

The trick is we would not know if a big pull back is underway until it happens. ;) By then, it might be too late to sell. So, I would hedge my risks and sell some at $4.20 anyway, if it should be tested.

If it breaks resistance and goes higher, I am still vested. If it retraces to support, I would be able to buy back at lower prices. :)

Hubert wee said...

Often when something is expected, it doesn't happen: expected the unexpected.

AK71 said...

Hi Hubert,

Very well said. :)

Hubert wee said...

So I wouldn't be surprised if SPH doesn't hit 4.20. That's how the market works- the minority always makes money from the majority- can you imagine what it would be like if everything always went according to plan ?

AK71 said...

Hi Hubert,

Let us try to join the minority. That's my plan but I am not sure that things would go according to plan. haha ;-p

Have a great day! :)

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