Technical View
STI, Golden Agri-Resources

Straits Times Index: Further declines remains a possibility

The Straits Times Index (FSSTI Index) performed against our forecasts and broke below pertinent support at the 1,640 level to finish 5.3% lower in the previous week. For the current week, we are expecting further downside as we believe that the selling pressure has not eased off.

After contracting for a period of around 10 – 15 days, the bollinger bands have just started widening which implies that more volatility may be forthcoming. Coupled with the 14-day RSI which still remains above the 30th mark and with the 14-day ADX that has recently shown a recovery, we believe that the present bearish trend still has additional room to develop.

Unless resistance at the 1,683 level (as derived from the 14-day moving average and a daily high) is taken out, we remain negative on the STI and expect it to fall to around 1,554 in the near term. This short term support level is derived from the 161.8% fibonacci extension of 1,780 to 1,675. However, in the event that this level is broken, we do not see any major support until the 63-mth low at the 1,473 mark.


Golden Agri-Resources: Downside may be limited

While we have forecasted the bearish trend of Golden Agri-Resources (GGR SP) correctly, the magnitude of its decline was more than what we had expected as it broke below our previous support at 0.285 to hit a low of 0.275 during last week. Nevertheless, we believe that further downside may be limited and we advocate accumulating long positions at our forecasted support levels.

The 14-day ADX is still declining, implying that the current (bearish) trend remains weak. Furthermore, while the MACD chart had recently seen a bearish moving average crossover, it nonetheless still trades in positive territory and above the zero line. Finally, although share price had experienced a decline last week, the bollinger bands had not followed on with an expansion, indicating the lack of selling momentum.

Support is identified at the 0.27 – 0.275 region, courtesy of a series of daily lows, the lower bollinger band and the 50-day moving average. On the other hand, resistance is present at the 0.315 – 0.32 area as implied by the technical gap and a series of daily highs.

This stock is covered by OSK Research out of KL. It has a TRADING BUY recommendation with a target price of S$0.60.

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



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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.

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