Battered blue chips show signs of life as STI rallies

Keppel Corp has broken out of a base formation at $4.60, indicating an upside of at least $5, a level not seen since August. The 50-day moving average has turned up, supporting the breakout. Quarterly momentum which had pummeled two-year lows, has turned up after a minor positive divergence. It has yet to break above its equilibrium line. Although volume expanded on Keppel’s breakout, it was not a spectacular rise. Hence, prices may stay around the $4.65 range for a few sessions before heading higher.

Elsewhere, Singapore Airlines appears to be in the midst of a base formation, evidenced by negligible volume, and a narrow trading range over the past two months. A trigger — as yet unknown — could cause a breakout.

The Straits Times Index had a much better week in Nov 2–6 than during the last week of Oct. The index has recovered from 2,423 to end the week at 2,578, up 155 points on the week. Although the DIs turned decisively positive, ADX remained flat, which may suggest that the rally runs into resistance at some point during Nov 9-13.

On a positive note though, the STI is now above its 50- and 100-day moving averages which have coalesced in the 2,509 and 2,550 range which should provide support if legs to the rally develop. Since stochastics is turning up from the low end of its range, and quarterly momentum is attempting to break above its own resistance at its equilibrium line, the index could continue rising towards 2,653, the level of the declining 200-day moving average.

The local market has been sidelined for much of the year with investors focused on the US markets and more recently on Hong Kong. With the postponement of Ant Financial, some liquidity may have flowed south to the local equity market. 

Read Also: Analysts maintain 'buy' on Keppel Corp as they look forward to O&M clarity