Cyclical stocks should continue to buoy the Straits Times Index. Since Joe Biden was announced winner of the US election on Nov 7, the local market has strengthened. For instance, the STI ended the first session after the US election at 2,609, and broke above its 200-day moving average on Nov 10 when it closed at 2,705. The STI closed at 2,839 on Dec 4, after retreating from an intra-day high of 2,903 on Nov 25. and down 16 points week-on-week.
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Short term stochastics has turned down and hence has limited the corrective moves by the index. Elsewhere, the breakaway gap which starts at 2,891 is providing resistance. However, since the 100- and 200-day moving averages have executed a golden cross, and quarterly momentum continues to strengthen, the STI’s rally is likely to persist after this temporary consolidation. When the upmove resumes, the next area off resistance is at 3,110. Support is raised to 2,793.
Cyclical stocks such as Singapore Airlines, Keppel Corp, CapitaLand and City Developments have all ralled despite their fundamentals. At any rate, equities usually move six to 12 months ahead of fundamentals.
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Hence, although Keppel Corp announced a set of underwhelming results in its 3QFY2020, including an impairment loss, its chart pattern continues to show relative strength. Technically, prices are challenging the declining 200-day moving average at $5.28, currently at a shade above its Dec 4 closing of $5.26. Despite rallying from a low of $4.10, this counter has further upside. A break above $5.28 is likely to coincide with a positive cross between the 50- and 100-day moving averages, providing the impetus for a gain of around $1 to $6.26.
SEE:STI dips slightly despite Singapore factory output growth in November
Since CapitaLand is comfortably above its 200-day moving average at $2.91, which should provide support, and its 50- and 100-day moving averages are rising following an earlier positive cross, pressures are likely to be upwards. Volume contracted during the sideways movement of the past 6 sessions. However, quarterly momentum has broken out. This should support a price move above the top of a multi-month base formation is at $3.17. Resistance is next at $3.50, and the target from the breakout is $3.84.