China Hongxing: New target.

Yesterday, when Edmond asked if we should set a higher target for China Hongxing at 22c, I replied "22c is what could be the eventual target if 19.5c is taken out convincingly (ie. volume has to expand significantly as price rises). However, along the way to 22c, there are many minor resistance levels to overcome."

Well, 19.5c was demolished as the price touched a high of 20.5c before closing at 20c today. This was achieved on very high volume. 20.5c was a resistance level that broke in early January.  Based on Fibo lines, it looks like a minor resistance and we could see 22c tested next (138.2% Fibo line). Congratulations, Edmond. :)

OBV is still rising strongly signalling continuing accumulation. The uptrend in the MFI is intact as it formed higher lows.  Demand is still strong.  It is however on the verge of being overbought but this does not really mean anything apart from suggesting that we stay vigilant, especially with such strong underlying momentum.

This is possibly the reason for the breakout:

China Hongxing Sports bags $198m worth of orders from Xiamen trade fair. The order book of RMB 1 billion represented a 12.6% increase as compared to that held in August 2009.
Wednesday, 08 September 2010

© 2010 - The Edge Singapore

Related post:
China Hongxing: Pushing upwards.

SPH: Waiting for elusive $4.20.

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.

STI little changed at 3,036.09 at closing
Tuesday, 07 September 2010

© 2010 - The Edge Singapore