Technical View
STI, Biosensors, SingTel

Straits Times Index: Consolidation expected

The Straits Times Index (FSSTI Index) broke below its key support level at the 2,745 mark recently, signifying that the possibility of any meaningful rebound in the short-term may be off the cards. The trading mood in the local market has also been much negative of late – although the DOW has managed to eke out a 1.5% gain in the 2H so far, this has failed to prop up sentiment in the STI which has retreated some 7% for the same period.

Nevertheless, what has been comforting is that trading volume has been on the decline, indicating that the selling pressure has not been strong. For the first two months of the 2H, daily volume traded on the STI averaged 188.4m shares, representing a sharp 20% drop over the whole of 1H when daily volume had averaged 236.5m. On the flip side however, should this trend of low trading volume persists, any potential rallies would also be unsustainable due to lack of investor participation.

Technically, the current selling pressure in the STI may have already eased off as the 14-day RSI had recently bounced off from the oversold territory. However, we also note that resistance at the 2,755 – 2,773 area, as derived from a technical gap and a series of daily highs, represents a strong barrier which the STI may not be able to break through in the near-term. Coupled with the lower bollinger band and a series of daily lows flooding the 2,660 – 2,690 support level, we expect the STI to consolidate in the 2,660 – 2,773 range for the week until a more decipherable trend appears.


Biosensors: Strong barriers ahead

The recent rally of Biosensors (BIG SP) during late August may be losing steam as we note that it is approaching overbought levels with the 14-day RSI presently coming in at 60. Additionally, its 18% gain during the last four trading days of Aug 08 was also achieved on declining volume, an indication that the rally could be unsustainable. More importantly, the presence of two firm resistance levels ahead makes the current risk-to-reward ratio for an entry point seem unfavourable.

Any further upside attained may be limited to the 1st resistance area at 0.64 – 0.65. Even if this barrier were to be taken out, the next level of resistance is also just a short distance away at the 0.685 mark, depicted by the 150-day moving average which has not been broken for the last three months. On the other hand, should share price start to fall, immediate support would be available at the 0.565 – 0.57 level. A further decline would encounter stronger support at the 0.525 mark as derived from a series of daily lows.


SingTel: May have bottomed out

Price action of SingTel (ST SP) looks to have broken out of its ascending triangle formation that indicates more upside may be forthcoming. We believe that SingTel may have bottomed out earlier when it reached a 7-mth low at the 3.39 level during mid-Aug, just before the MACD chart had produced a bullish moving average crossover. The candlesticks are also looking bullish as they have recently depicted a series of higher highs and higher lows.

Should share price continue to appreciate, we see resistance at the 3.63 – 3.64 area capping further advances, courtesy of the 100-day moving average and the daily highs on 31 Jul & 01 Aug. Nevertheless, any pullbacks should be well supported by the 3.39 – 3.40 level by virtue of the lower bollinger band and the daily low on 19 Aug.




DMG & Partners Research Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months
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Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
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Neutral: Share price may fall within the range of +/- 10% over the next 12 months
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Take Profit: Target price has been attained. Look to accumulate at lower levels
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Sell: Share price may fall by more than 10% over the next 12 months
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Not Rated: Stock is not within regular research coverage



This research is for general distribution. It does not have any regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular investments and consult an independent financial adviser before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report.

The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to change without notice.

This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities, DMGAPS and its affiliates, their directors, connected person and employees may from time to time have interest and/or underwriting commitment in the securities mentioned in this report.

DMG & Partners Securities Pte Ltd is a participant in the SGX-MAS Research Incentive Scheme and receives a compensation of S$5,000 per stock per annum covered under the Scheme.

DMG & Partners Securities Pte Ltd is a joint venture between OSK Securities Berhad (a subsidiary of OSK Investment Bank Berhad) and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited.

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