Wednesday, July 04, 2007

Independence day :)

STI's first day of distribution... Open strong but close weak, with volume slightly higher than yesterday. According to experience, STI will continue such action for 2-3 days at most before dropping much more.

STI rebounded from ema50 day level of 3480 to reach a lower high of 3580 (compared to previous peak of 3652 on 20th June), forming a lower high already. If STI drop below 3480 (previous low on 27th June), we would have completed a lower high and lower low...establishing a downtrend.

Thus it's crucial that STI find support before 3480, otherwise the downtrend might bring us down a that's scary. I identified 2 somewhat strong support at 3530, the other one at 3480. The support at 3480 better hold, if STI goes lower than that, that would mean that downtrend is established. Bad news.

A lot of stocks went up high and close lower, esp those construction stocks. Before I left in the morning, most of them a breaking new 52 weeks high. The afternoon session brought all the stocks to close slightly negative. Construction stocks are still very resilient.

I happen to browse through my watchlist and saw this wonderful chart pattern, thought of sharing it here. It's from market darling Cosco.

Looks like an ascending triangle with decreasing volume whilst forming the triangle. Flag pole inside the ascending triangle too. Breakout point is at $4.02, confirmed by strong volume upon breakout. Macd and stochastic support the impending uptrend too. It's safer to enter at 4.18 (resistance level on 21st June) but might have missed out by then.

Flag target = $4.50 (min)
Rather conservative ascending triangle target = $4.60 (conservative because I'm not so good at determining objective price target for triangle formation)

Looks good huh? Good reward, manageable risk. I'm seriously thinking about it...might want to try the warrants, because the $4 entry price is rather steep...unless contra.

Some news on lianbeng:
They announced today that they acquired Mountbatten site for S$42 million. That site is currently a cluster of eight freehold semi-detached houses along mountbatten road. Looks like lian beng is going to redevelop the site into a 60 unit condominium, since it is in close proximity with branded schools like tao nan, CHIJ primary, chatsworth international school and near parkway parade and katong shopping centre. They estimated the price to fetch S$1,100 psf and above. Estimate development charges is S$633 psf per plot ratio (the site has a plot ratio of 1.4).

This news came 2 weeks after they announced a joint acquisition of lincoln lodge off newton road. I like the way lian beng diversifies its core business of construction into property development. This way, if construction sector ran out of steam, they can always rely on another sector (property) to sustain their balance sheet and cash flow. The risk might be the timing factor. They must have bought the site at a high price since property market is booming. Thus, they have to develop the site quickly and sell while the market is still hot. Otherwise, they might be sitting on a parcel of land bought at a high...not a wise decision if property bubble burst.

But overall should be okay. I don't expect the property bubble to burst anytime soon. Perhaps it might last a few year? Maybe till 2009? I'm just wildly speculating. Building a 60 units condominium shouldn't take too long. I think Kovan melody just took a year or so, and that's a rather big project. A 60 units condo...maybe half a year roughly? Should be enough to capitalise on the hot property sector.

Eagerly awaiting the new headlines that XXX condominium along mountbatten road selling at $1500 psf, haha :) Liangbeng huat until dunno what already :)

Dow no show tonight, it's independence day (4th July). Tmr I think STI would resume the open strong, close weak pattern. 10 am should be the point to look at, because Shanghai and HSI opens at that time. STI should be looking at both of them for direction, being a headless chicken all the time.