Technical View
STI, ST Engineering, China Sunsine

Straits Times Index: A Symmetrical Triangle at play

The Straits Times Index (FSSTI Index) failed to record gains during the last week as the uptrend channel formation was broken and therefore did not translate to further upside. Nevertheless, although trading was highly erratic, the index managed to hold up well and closed almost flat in the previous week and lost just 16 points. While we believe that the underlying trend is still positive for the STI according to our Elliot Wave count, we note that a symmetrical triangle pattern is currently in the making – this suggests that the index may continue to consolidate from last week and that a breakout move is forthcoming after this period ends. The MACD chart is also starting to flatten out and is approaching neutrality.

Prior to the 2,745 support mark which we have held on to so far, a new layer of support has emerged at the 2,819 – 2,827 area as defined by the lower bollinger band and the trend low on 16 Jul. Initial resistance, on the other hand, would be available at the 2,983 level, courtesy of the upper bollinger band and the 50-day moving average. The next level of resistance remains unchanged at the 3,085 – 3,146 range as identified by the technical gap.


ST Engineering: A reverse H&S formation in the making

Price action of ST Engineering (STE SP) is carving out the right neck of a reverse head and shoulders (H&S) pattern which implies that further upside may be imminent. The MACD chart that is currently looking positive also supports the view that share price should remain bullish.

We have identified initial resistance to be at the 2.86 – 2.91 area, as seen from the confluence of the neckline of the reverse H&S, the upper bollinger band and the 50-day moving average. Should this barrier be broken, we believe that share price would soar all the way to the 3.19 – 3.22 area to fill up the technical gap. This area also represents the target price derived from the reverse H&S. Support meanwhile is seen at the 2.70 level as seen from the trough of the second neck of the reverse H&S.


China Sunsine: Rally may continue

Price action of China Sunsine (CSSC SP) looks to have completed its consolidation phase after breaking above the 0.23 level on the back of higher-than-usual trading volume which suggests that this trend may be sustainable. Furthermore, the MACD chart is also looking bullish as its moving averages are targeting a centreline crossover while the RSI remains below the 70 mark, an indication that the share price is not overbought. Should share price continue with its ascent, it would first have to clear the 0.245 immediate resistance level (as derived from the 100-day moving average and a series of daily highs) before any additional gains can be made. Strong resistance at the 0.28 mark (200-day moving average), however, should cap any further advances as the share price reaches an overbought level. On the other hand, any pullback experienced from current levels should be limited to the 0.205 support mark.




DMG & Partners Research Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months
-----------------------------------------------------------------------------------------------------------------------------------------------
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
-----------------------------------------------------------------------------------------------------------------------------------------------
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
-----------------------------------------------------------------------------------------------------------------------------------------------
Take Profit: Target price has been attained. Look to accumulate at lower levels
-----------------------------------------------------------------------------------------------------------------------------------------------
Sell: Share price may fall by more than 10% over the next 12 months
-----------------------------------------------------------------------------------------------------------------------------------------------
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.

More

Towards a brighter tomorrow
At a time when a lot of companies are expected to weigh in with weaker sales and profit numbers amid the current global financial turmoil and downturn, JK Yaming expects to chalk up record figures for the full financial year.

Insulated US tech companies hit by slump
The US technology industry, which resisted the economy's growing weakness over the last year as customers kept buying laptops and iPhones, has finally succumbed to the slowdown.

BlackRock Global Views: 4th Quarter
Amid all of the current turmoil, our best advice is for investors to focus on broad diversification among asset classes. In these circumstances, we recommend that investors remain cautious...

Commodities to outperform stocks, says Superfund
Most commodities are likely to rebound and outperform stocks both in the short-term and over the next 3-5 years, according to managed futures fund provider, Superfund.

Deflation Fears Lurks as Global Demand Drops
As dozens of countries slip deeper into financial distress, a new threat may be gathering force within the American economy – the prospect that goods will pile up waiting for buyers and prices...

Global investors see equities as undervalued
Investors are waiting for the right conditions to return to equity markets amid the most pessimistic outlook yet recorded, according to Merrill Lynch's latest survey of fund managers.

Buy American. I Am by Warren Buffett
I've been buying American stocks. This is my personal account I'm talking about, in which I previously owned nothing but United States government bonds.

Sarasin finds silver lining in financial storm
Investors are advised to take a fresh look at global markets and seek opportunities despite the financial crisis over the past four weeks...

Threadneedle offers funds with short-sell capabilities
The UK-based Threadneedle group will soon be offering investors in Singapore mutual funds with short-sell capabilities known as 130/30 funds.

Investors eye the Fear Index
Fear is running high on Wall Street. Just look at the Fear Index. With all those stomach-churning free falls and sharp reversals in the stock market recently...

Q&A with Lead fund manager at Midas Capital International
Given the bearish market conditions, what would be your advice for investors in their approach towards their asset allocation strategies?

Q&A with Saxo Capital Markets, Asia Pacific Strategist
Given the bearish market conditions, what would be your advice for investors in their approach towards their asset allocation strategies?

Stock Pick
Man Wah Holdings: Neutral (Phillip Securities, 18 Nov), Swiber Holdings: Neutral (DMG, 18 Nov), Armstrong Industrial: Buy (DMG, 18 Nov), Olam: Buy (DMG, 17 Nov), Sembcorp Marine: Buy (DMG, 17 Nov)