After a breath-taking parabolic rise in 2007 to a high of almost $17, came a nasdaq style plunge that took it to unbelievable lows below $4, in a span of just over an year. A nice study of sentiment right here. Rational and efficient markets, anyone?
The retrace since Mar-09 seems to have stalled just below the 38.2% fibonacci level, indicating lack of strength. Now lets take a look at a medium term chart of SGX:
The price has gapped down through a crucial support level in the 7.80 range, and sitting on the lower consolidation channel line(cyan) and minor support at 7.60. Also, note the rise in volume during the latest downtrend.
Elliot Wave Analysis
Applying elliot wave analysis, the BIG decline from 2007 was in 5 waves. So we'd expect a A-B-C retrace up. Taking the most obvious count, it looks like we did complete a 3-wave move up (with B being the sideways action from may to july). The top of this move was probably in Sep09 at 8.75. If so, a 5-wave move down has begun.
Alternate view (lower probability): The move up since march was A move, and now in a consolidation B down, with a higher C to come.
So what's the weather forecast for SGX?
Short Term: 7.6 is minor support, and 7.8 is resistance. There might be a weak rebound or sideways consolidation next week, to test resistance and support.
Medium term: A break-down is likely towards good support at 6.8 (38.2% retracement)
Longer term: A 5 wave move down to at test the lows of 3.8 is possible.
Caveat & Disclaimer
1. Elliot wave analysis & Finonacci retracements work best in high volume trades (stock indices, forex), and are not reliable for individual stocks. SGX being an important barometer, merited this post.
2. Convincing break of the blue downtrendlines in the short term negates my views.
3. The numbers quoted above are general ranges, and not exact levels.
4. This is a personal view. Please do your own analysis before executing your trades.
Your constructive comments and views are welcome. :)
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