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SMRT: Downtrend intact.

Friday, January 13, 2012

Technically speaking, SMRT doesn't look good and I am not referring to its trains stalling. OK, bad joke.

Lower high and lower low in price are accompanied by a lower high and lower low in the MACD which is in negative territory. The downtrending MFI suggests reduced demand as the 50% line acted as resistance.

However, forming a doji provides some encouragement for long holders. The doji represents indecision and is a stalemate between bulls and bears.

That the doji formed despite higher volume on a day when price went lower than the low of the previous session suggests that there is some buying support. However, it could also be traders covering their short positions ahead of the weekends.

Single stick reversal signals are usually less reliable. For anyone who is interested in going long here, look out for confirmation next Monday.

If the signal is not confirmed, a lower low could form. $1.70? Perhaps.


Ray said...

nice analysis :)

AK71 said...

Hi Ray,

Glad you like it. Please take it with a pinch of salt. ;)

Derek said...

Hi AK,

I don't know about TA but I have been glancing on this stock since the major train break down. Sadly, I don't see any significant drop in share price and in fact rebounded somewhat. I believe SMRT will no longer be focusing on generating profits for its shareholders (at least not for the immediate future). Hence dividends will fall. Also, coupled with the impending fine and possible higher cost of maintenance, the price should drop.

Still patiently waiting.

AK71 said...

Hi Derek,

Waiting to buy, I see. ;)

If we were to look at the chart with a longer time horizon, it would be quite clear that SMRT is still down trending. It could possibly drift lower.

Ray said...

From a FA pov, I find the business model going ever so strongly. In an almost monopoly of buses and trains services. I don't see the revenue dropping. Only concern is the maintenance and other operating expenses going up. I am waiting for it to drop further for the short term too :) hopefully can pick up a gem on the cheap. Any thoughts AK?

AK71 said...

Hi Ray,

SMRT's business is bullet proof. I am tempted to be a shareholder too.

Technically, however, it looks like its share price could weaken. If it does weaken from here, I could initiate a long position. :)

AhJohn said...

Hi AK, time to re-visit SMRT?
Although profit drop significantly, but still making money. For stock price, SBS Transit also follows the same downward trend, but I don't think gov will allow both companies to fail.
So the question is only what price to go in? $1.0, $1.1, $1.2?

AK71 said...

Hi Ah John,

I don't think the government will allow the companies to fail too. However, I don't think the government will allow them to increase fares substantially either.

Public unhappiness with SMRT has led to the Ms. Saw being replaced, I have no doubt. How much more needs to be done? Probably a lot more and it won't be cheap. More money has to be spent and it is ongoing.

When will earnings improve? I have no idea. Do you have an idea?

Right now, it is burning loads of cash and gearing has shot up.

It could be a good investment again one day but I am not sure when that will be.

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