Wednesday, December 8, 2010

Singapore Exchange: Short-term bounce ahead?

A classic case of  "Buy the Rumour, Sell the News"! After SGX went vertical, it collapsed (as all parabolic moves eventually do), and is now back at previous rally high of $8.50. Coupled with the oversold indication on the daily RSI, it is a good place for a short-term bounce towards $8.80 initially,  probably followed by $9.00 & $9.30. A sustained break below $8.50 at this stage will have us back at the drawing board!

As if by coincidence, expect some positive news flow about the SGX-ASX merger in the coming weeks! ;)

Shanghai Composite & Shenzhen Composite

Shanghai Composite has been consolidating in a narrow range on anaemic volume, after the quick drop from 3150. The 2950 level proving to be solid resistance to the upside, while a break below 2800 might see support just under 2700. Probability of a move down is higher in keeping with the short-term trend.

As for the wave count, the bullish count is hanging by a thread. A break below 2700 will be bearish, and possibly indicating a truncation.

Shenzhen Composite (SZSE)

It might be useful to look at the other Chinese Index: The Shenzhen Composite, which is painting a more bullish picture.

Although still below its' all-time highs, it has exceeded its rally highs. After a successful back-test, it is currently in a triangle consolidation. As long as it stays above 1230 level, there's more upside ahead. Depending on your stock selection (or that of your fund manager), your performance might be closer to this index.

I will be posting occasional updates on the SZSE as well in the future.