Dow Update

Dow industrial average has fallen to 1997 levels. It has broken its Nov 07 low of 7392. The picture looks bad at the moment. ADX is at 49 levels and –DI is above +DI. This suggests a continuation of the down trend. MACD indicator has also crossed below its signal line, another bearish indication. The only bright spot is that the RSI indicator has not made a new low yet and divergence of RSI can still occur. For trend to reverse, Dow has to conquer the resistance at 7392 and 9175. In the mean time, the bears have the upper hand.

Dow Jones

The Dow Jones Industrial Average looks to be forming a bottom. The index is near its Nov 07 low of 7392. The trend is still bearish at this point in time. However there are 2 positive signs in the technical charts. Firstly, the weekly MACD indicator is above its signal line and secondly, the weekly RSI seems to be forming a divergence signal. The index needs to break the downtrend channel line in order for a sustainable rally.

Resistance level is at 8446 level and support is at 7392 level.

Capitaland

It is interesting to see Capitaland shooting up even though it announced a rights issue.

The technical indicators sure look good at the moment. The MACD made a bullish crossover on 10 Feb 09 on heavy volume. Stochastic indicator also made a bullish crossover. RSI is increasing and is not in overbought/oversold territory.

The stock is approaching resistance at $2.90. This level also coincides with the upper Bollinger Band.

Let’s see if the stock can penetrate the $2.90 level today.

SPC

SPC had a good run recently. It rallied from a low of $2.18 on 21 Jan 09 to a high of $2.86 on 9 Feb 09. Goldman Sachs downgraded the stock from “neutral” to “sell” and reduced its target price from $1.80 to $1.60.

The stochastic indicator is indicating short term weakness as the %D line has just crossed under the %K line making a bearish crossover.

The force index has also decreased from a high value and it looks to be going negative anytime soon.

The next support level for this stock is at $2.49.

10 Stocks To Ride A Recovery

The Lunar New Year got off to a good start this week. The index managed to gain 61 points for the week to close at 1746 on Friday.

However US market experienced a triple digit loss of 148 points on Friday to end at 8000 level. This will put some pressure on the Singapore market on Monday.

The latest issue of Edge investment weekly has recommended 10 stocks to ride the recovery.

The list is as follows:

Company	Price as at 30 Jan 08 (S $)
Capitaland	2.400
Epure International	0.280
Genting International	0.435
Midas Holdings	0.525
Neptune Orient Lines	1.130
Pan-United Corp	0.370
Sihuan Pharmaceutical	0.705
Singapore Exchange	5.150
ST Engineering	2.280
United Overseas Bank	11.880

The reasons quoted for buying the stocks sound reasonable. However note that last’s year recommended holdings produced an average return of -55%. For more information, please refer to Feb 2 – Feb 8 09 edition of the Edge Weekly.

Let’s hope this year the recommended portfolio can give a better return.

Happy investing and Gong Xi Fa Cai.

SPH

Analysts are looking at the potential dividend payout to support the shares. Citi Investment Research expects a 9.9% dividend yield for FY2009, Kim Eng expects a prospective 7.5% dividend yield in FY 2009. DBS and OCBC are forecasting dividend yields of 8% and 7.1% respectively. For more information please refer to The Edge Investment Weekly.

The technical picture for SPH is not looking good. It broke the $3.00 support level on 13 Jan 09 and closed at $2.73 on Friday.

The Fibonacci objective point indicates a target price of $2.72 so the stock may stage a rebound from this level.

However, looking at the MACD charts and ADX charts, any rebound will be simply be a technical rebound and traders who are still holding on to their long positions will try to liquidate their holdings to limit their losses.

Capitaland

Capitaland had a roller coaster ride this week with the stock going to as high as $3.68 before hitting a low of $2.89 on Friday. The stock managed to close above its low on Friday to end at $2.91.

The stock is now sitting on the 61.8% Fibonacci Retracement level as well as the support level. With the Dow closing near its low of the day on Friday, this support level will be difficult to hold come Monday.

The test will be to see if the break is a false breakdown. If that is the case, the stock should quickly reclaim the $2.90 level. However looking at the big sell down volume, the bears should have the upper hand. The next support line is at $2.66.

In the latest issue of The Edge Magazine, it was mentioned that there were rumors that Capitaland may announce a right issue and the ratio would be at one-for-four, at $2.50 per share. If the rumor turned out to be true, the possibility of the stock retracing all the way to 5 Dec 08 low of $2.43 is very high.