STI: What now?

In reply to a question from a visitor to my blog, Anthony, on whether the decline in the STI is the beginnings of another bear market, I said, "We will have to pay attention to the trend. The STI, despite its current weakness, is still trading above the channel support. The uptrend is intact. The market is just going through a much needed correction."

I have drawn the channel resistance and support in brown color here.  We see how the price action yesterday formed a white spinning top with the high of the day resisted by the 100dMA.  Index movement stayed within the confines of the up channel.  We now have to see if the reversal signal is confirmed next week.  MFI is still declining, indicating a weakening buying momentum and the index seems poised to enter oversold territory as a new low is inevitably formed.

If the STI does break down, there is some way to fall and I expect the rising 200dMA to provide some support.  That is at 2,550 thereabouts next week.  I have also identified two support levels in red based on candlesticks support and resistance.  Let us hope we never have to test those levels.  Then again, Mr. Market pays scant attention to our hopes.

Healthway Medical: Dwindling volume.

Healthway Medical closed at 16.5c after touching a low of 16c on the back of reduced volume.   Without any significant expansion in trading volume, any upward movement in price is likely to be unsustainable.  In fact, the chances of a downward drift in price is a more likely scenario when volume dries up.

The interest in Healthway Medical's rights also hit a low note today as the price touched an intra day low of 7.5c.  This is a far cry from the first day of trading when it traded as high as 9.5c!  This also means that the purchasers of these rights would be able to own more Healthway Medical's shares at only 15c after paying another 7.5c by 9 Feb 2010, the deadline for the acceptance and payment of the rights.  Why buy the mother share at 16.5c then?

Personally, I see 15c as an important XR support level, followed by 14c.  For anyone who is interested in owning more Healthway Medical's shares at this point in time, buying the rights at 7.5c seems like a better idea than buying the mother share.

DMG and Partners, who initiated coverage of Healthway Medical earlier this month and issued a buy call with a target of 28c has issued a new lower target of 21c yesterday.  They cited the enlarged capital base due to the new shares from the rights issue as well as a share placement exercise as the reasons for lowering the target price.  It may be coincidental but this gels with my XR eventual target price of 21.5c compared with my CR eventual target price of 24c earlier.