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DBS, OCBC and UOB: More downside or reversal?

Tuesday, March 14, 2023

Long time regular readers of my blogs know that I have been accumulating stocks of DBS, OCBC and UOB.

The last time I did this on a relatively significant scale was in October 2022.

Over a few days, I increased my investments in OCBC by 11% and UOB by 19%.

Then, the local lenders' stock prices rose and I ceased accumulation.

I like to think that I was not suffering from an anchoring effect as I simply refused to pay higher prices to increase my stakes.

I just didn't think I would be getting as much value for money at much higher prices.

I was adding to my investment in OCBC at almost book value and paying a 5% or so premium to UOB's book value in October 2022.

With the stocks selling off, it now seems that I might have a chance to accumulate at those levels again.

This is a realistic expectation as trading volume has expanded significantly as bearish sentiment took hold.

Of course, seasoned traders know that stock prices could simply drift lower on low volume but when there is high volume on down days, it adds fuel to the fire.

In this blog, I will talk to myself about where I think the stock prices of DBS, OCBC and UOB might be heading.

As I do this, I remind myself that technical analysis is about probability and not certainty.

I will start with what I feel is the weakest of the three, UOB.

Of the three banks, UOB is the only one to end the day with a red candle.

UOB's stock price started the day at $28.05 but closed at $27.84.

The bears are strong here and the flat 200 days moving average at $28.47 will probably be the resistance level to watch for now.

The MFI has entered oversold territory which might bring out some bargain hunters but with momentum deep in negative territory, it is unlikely that UOB would break resistance provided by the 200 days moving average.

I see the next significant support at around $26.90.

This is a many times tested support level which was also the resistance level in the month of October last year.

I feel that DBS's stock shares a similar fate to UOB's but it ended the day with a green candle which is a sign that the selling pressure here is better absorbed compared to UOB's case.

DBS opened at $31.70 but closed higher at $32.33.

Similar to UOB, the 200 days moving average at $33.15, previously the support, will now be the resistance to watch.

Just like UOB, DBS is now in oversold territory which could result in some bargain hunting.

We could see the gap filled at $32.70 in such a case but with momentum deep in negative territory, it is unlikely that resistance provided by the 200 days moving average could be overcome.

We could possibly see a retracement to $30.00 or so a share which was the support level seen in the months of June and July last year.

This is if the bearish sentiment continues to dominate.

So, that leaves us with OCBC which has exhibited the most resilience.

Even though the trading volume was much higher than the day before, a green spinning top, a reversal signal formed.

Now, a single candle reversal signal isn't very strong and it could very well fail.

Just like DBS and UOB, OCBC is now trading at below its 200 days moving average.

Unlike UOB's which has flatlined, OCBC's 200 days moving average, currently at $12.14, is still rising although gently.

The positive divergence in OCBC's chart which I mentioned in recent blogs on our local banks' price action is still visible.

If I were to join the the lowest points in July and October last year, we can see that OCBC's uptrend is still intact.

The trendline could provide immediate support which seems to be at $11.80 to $11.90 this week.

If that breaks, then, the uptrend is broken and we could see a retracement to various supports at $11.70, $11.50 and then $11.30.

These price levels have acted as important supports and resistance many times before.

Depending on which side of the fence we are on, the bear can be a friend or a foe.

If we have been doing the right things, the bear is our friend.

More than 50% of tickets for "Evening with AK and friends 2023" have been sold. As expected, the tickets are selling at a slower pace this time.
Evening with AK and friends 2023. Ticketing.

Related post:
Buy OCBC. DBS and UOB next?


EX said...

Hi AK, thanks for the very detailed technical analysis. Although it's quite chim to me, I can pick up the key points and what you're trying to say. Also picked up a little when the prices dropped and will continue to monitor using your analysis as a reference. Thanks for talking to yourself! 😀

AK71 said...

Hi EX,

Just talking to myself, as usual, of course. ;p

It seems that OCBC's stock price is really the most resilient.

It has recaptured the 200 days moving average and if it ends the day like this, the resistance would become support.

DBS and UOBs' stock prices have bounced higher from yesterday's close but they are still below their 200 days moving averages.

We can chat about TA too on 10 May if you wish. :)

Dividend Tech Warrior said...

Hi AK, my old friend. Dividend warrior here :)
Have nibbled some UOB & OCBC during the short dip.
Time in market is better than timing the market.

garudadri said...

Dear AK
Thanks for reiterating the technicals situation
Agree in principle
However, what I have noted in the past is that waiting for those points has often meant missing the boat and it has happened to me a few times
Fundamentally sound companies like our banks, often don’t stay or linger lower unless there are big macro issues out there. The post-results downtrend that we saw with all three banks was justified as that would be letting out some froth
However, the recent drop was more reactionary to the US developments plus the recessionary fears
I started nibbling steadily on all three without waiting for too much as a drop and have no regrets as I have plans to buy more if at all they drop
Bought UOB again yesterday evening and this morning all up
There is an impression, very much justifiable, that the Fed has pivoted or at least will pivot
People have started talking about even rate cuts!
REITS are going up last three days
This will create a positive aura, although could turn out to be a false dawn, in the short term. This might put a floor under equity prices and I will not be surprised if the three banks go higher and reclaim support levels
Overall, I was comfortable starting my buys post-results and will buy more in small nibbles steadily if at all they start dropping again
The opportunity cost of doing nothing needs to be factored in inflationary times but striking a balance between omission and commission is easier said than done
Best wishes

AK71 said...

Hi DW,

Time in the market works well most of the time. :D

Timing the market from time to time is just something I like doing on the side. ;p

AK71 said...

Hi Garudadri,

Thank you for another thoughtful comment. :D

Yes, we should all have a plan we are comfortable with. :)

TA is very interesting to me but I remind myself that TA only provides a window into Mr. Market's psyche and it isn't always reliable.

We have different circumstances.

So, it is not surprising if we should have similar but non-identical strategies.

During the COVID-19 pandemic's initial sell down, if I had kept buying as prices were going down, I would have run out of money before the market bottomed.

It made more sense for a person with limited resources like me to wait for the dust to start settling before making a move and that was what I did.

I was moving cautiously but enough to let me increase my investments in DBS and OCBC at much lower prices, and also to accumulate a significant position in UOB to rival the size of my investments in DBS and OCBC back then.

I shared what I did back then in a few blogs and I have hyperlinked them below for anyone who might be interested in a bit of history. ;p

Of course, we should do whatever we feel is best for us. :)

1. Buying DBS, OCBC and UOB (Apr 2020.)
2. 3Q 2020 passive income.
3. Higher dividends from DBS, OCBC and UOB (July 2021.)
"The buying went on for a few months, started in April and went on till October last year."

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