Technical View
STI, China XLX, SGX

Straits Times Index: Last line of defense

Our controversial call that a bottom for the Straits Times Index (FSSTI Index) was probably less than 100 points away when the STI was trading at 2,955 is now literally hanging by a thread after the index saw a low of 2,862 last week. Nevertheless, we will stick with our bullish view for now as we still believe that the STI would be commencing its impulse wave 3 soon after the current wave 2 ends.

Market consensus is of the view that a technical rebound would take place this week as the STI has been oversold for quite some time. While we do agree that the STI is oversold as seen from the 14-day RSI, we are of the opinion that any meaningful upside encountered in this week would be implicative of more than just a technical rebound – we believe this could probably indicate that the market has indeed bottomed out. Furthermore, price action for the previous three trading sessions do suggest that a bottom is being hammered out.

Our support level remains almost unchanged at 2,862 as depicted by the partially-filled technical gap and the low on 03- Jul. On the other hand, barriers to any upside would first be encountered at the 2,960 mark, courtesy of the 14-day moving average and the high on 01-Jul. Also, further resistance is seen at the 3,045 – 3,060 range, as inferred from the 100-day moving average and the high on 18-Jun.

Immediate support remains at around the 2,925 region. Additionally, we have identified another key fibonacci retracement at the 2,865 – 2,875 support area should the initial support mark be taken out. On the other hand, immediate resistance stays at the 3,070 level, courtesy of the 100-day moving average and the high on 11-Jun.


China XLX: Technical rebound may occur

Price action of China XLX (CXLX SP) may experience a technical rebound soon after having plunged some 35% since its May-08 highs. Although share price has produced a series of lower highs and lower lows while violating the lower bollinger band for most of the previous week, note that this trend was discontinued during last Friday as price action attempted to break above the lower band. Also, with the 14-day RSI below the 30 mark, share price may be able to see some respite from the current downtrend.

Initial resistance at the 0.78 mark, if broken, should translate to more upside till the 0.82 resistance level where the 100- day moving average resides. On the other hand, immediate support resides at the 0.675 mark as represented by the lows on 26-Mar and 03-Jul. Also, additional support as derived by the 76.4% fibonacci retracement move from 0.465 to 1.06 is available at the 0.605 level if the 1st support level is taken out.


SGX: Looking oversold

Share price of SGX (SGX SP) has generally trended downwards inline with the lower bollinger band for the past four weeks but managed to break below this lower band last Thursday. We are of the opinion that this breakout move may not be sustainable, as the 14-day RSI is currently looking to be very oversold and more importantly, the MACD chart is presently flattening out and is on the verge of producing a bullish moving average crossover.

We peg initial resistance at the 7.20 mark as derived from the 21-day moving average and the highs on 23 & 24-Jun. Stronger resistance would be seen at the 7.80 level, courtesy of the upper bollinger band and the unfilled technical gap. Meanwhile, should share price continue with its fall, support at the 6.26 mark is projected to cap any further downside.





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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