STI ALERT- False breakout (Possible peak?) (STI,DBS,UOB)
To all blog readers, it has been a while since we last posted on the blog due to busy schedules and work. However I am sure for those who are in our group chat you would have know that we have been shorting the tech stocks like Sunningdale, Hi P and valuetronics. We also managed to catch a temporary bottom for Venture making a dollar profit in it as well as hopping on CDG and Japfa.
The focus of this blog post is to alert you about a possible false breakout of the STI and also the recent bearish outlook of the global market along with the leader DJI. Let us take a look at our familiar local market in this post.
STI Analysis
In recent weeks STI had broke out to a new high, however I am sure everyone noticed the divergence between the broad market and the bank stocks. Bank stocks were leading the way, while other stocks crumbled. This divergence is surprisingly similar to 2015's peak where we also see that banks were much stronger than the STI itself. When STI peaked in May 2015, DBS continued to stay strong until July 2015 before the market crashed. This uncanny similarity is seen now, where we see a clear divergence between bank stocks and the broad market.
Chart of STI vs DBS 2015
Moving forward currently we see a false breakout on the STI index too as well as an island reversal accompanied by a bearish shooting star candle.
Chart of STI, DBS and UOB as of 4th May 2018
Let us take a look at DBS chart, we also see a bearish divergence seen on the macd where price made new high but macd made a new low and noticed there was a high vol bearish engulfing candle.
We are currently on the shorts for UOB at 29.23 and the chart is also showing signs of exhaustion and also an island reversal. Today MACD also had a bearish crossover.
General outlook
If you recall this bull run was led by tech sector followed by banks, tech sector has already crumbled what will be next, our guess will be the banks. Recall back early this year, Venture, Hi P, AEM constantly received bullish calls and analyst report to issue a buy call, few months later we see the same on the banks. As most famous people such as Jesse Stine, Jesse Livermore etc would tell you, market tops are usually formed at maximum euphoria and bullishness often accompanied by multiple upgrades and analyst reports. And most people will start telling you so and so stock is a must buy, for instance venture, aem, hi-p. Take a step back and think, when would BBs be able to distribute their stock to retailers at ease? It would clearly and likely be when everyone is bullish on the same group of stocks just as we have seen in sunningdale, venture, aem where clearly there were a series of false breakouts, toppish patterns like (head and shoulders) when clearly fundamentals were still fantastic. Most investors would tell you: But there is nothing wrong with the company, but think again what the set of results that you are seeing are all history and in my own experience technicals usually would show you tell-tale signs of future fundamentals for instance the oil sector back in 2014-2015. Of course this is just my humble opinion, please DYDD in your own trading :)
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