Technical Analysis: The Phillip 20 – November Monthly Review December 6, 2017

“The Phillip 20” is a portfolio of our top technical picks of stocks on SGX.

  • New Entries: Breadtalk, Golden Agri-Res and Sinostar Pec
  • Take Profit: Valuetronics and Haw Par
  • Stop loss: BlackGoldNatural, Chasen and OUE
  • Total return since May to November is +4.97% with a realised loss of -0.16% in October
  • STI facing an immediate roadblock ahead at the 3457 resistance area where a near-term correction is likely to happen

In November, the Straits Times Index (STI) made decent advancement as it gained +1.76%. The continuation of the bullish momentum confirmed the formation of the next higher high point within this uptrend that was started in January 2016.

STI Weekly Chart – Immediate roadblock ahead at 3457 resistance area

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Red line = 20 period moving average, Blue line = 60 period moving average, Green line = 200 period moving average

However, the STI might be facing some immediate roadblock ahead at the 3457 high. That resistance area was a pivotal point back in May 2013 and February 2015 where the STI experienced a correction of -11% and -2.9% respectively. Moreover, with the recent soaring bullish momentum, the Relative Strength Index (RSI) has once again entered into the overbought condition. The current reading of the weekly RSI is at 71 (overbought) signals a high possibility of a correction here at the 3457 pivotal resistance area.

Nonetheless, from a long-term perspective, the uptrend that was established in January 2016 remains intact as price continues to form a series of higher highs (HH) and higher lows (HL). Hence, if the correction does occur, we should see a higher low point being formed somewhere around the 20 week moving average and the 3354 resistance turned support area where the uptrend retakes control. The longer-term target for the bulls is the April 2015 high of 3549 points.

Amidst the rising STI, mainly propped up by the bank stocks, the “Phillip 20 Portfolio” underperformed in November due to the fading of momentum within the momentum stocks. Most of the position in the “Phillip 20 Portfolio” went into correction mode in November thus resulting in a drawdown of -4.3% in the portfolio while the STI gained +1.76%. The fading of the momentum also adversely impacted the total return since May as of end of November where the total return of the “Phillip 20 Portfolio “fell from 9.66% in October to 4.97% in November.

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Winners

Both Valuetronics and Haw Par were closed out with a profit in November due to the bearish price action that was exhibited. Valuetronics was closed out at 1.005 with an equal-weighted gain of 1.1% while Haw Par was closed out at 11.98 with an equal-weighted gain of 0.48%.

Losers

Due to the weakening momentum BlackGoldNatural, Chasen and OUE have triggered their stop losses resulting in equal weighted loss of 1.24%, 0.65% and 0.28% respectively.

New Entries

Three new trades were included in the portfolio, namely, BreadTalk, Golden Agri-Res and Sinostar Pec in November.

Note: The following two positions are pending;

  • ComfortDelGro pending entry price is at 2.13. Since the last update, price has continued to stay range bound between the 2.10 range high and 1.985 range low. If price breaks below the 1.955 low, this trade will be invalidated.

CityDev pending entry price is at 12.56. The lack of bullish follow through after the last update took price back into a correction. If price breaks below the 11.78 low, this trade will be invalidated.

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About the author

Profile photo of Jeremy Ng

Jeremy Ng
Investment Analyst
Phillip Securities Research Pte Ltd

Jeremy specialises in Technical Analysis and has 10 years of experience in studying price action. His areas of expertise include intermarket analysis on the equities, currencies, commodities and bonds market.

He graduated with a Bachelor of Science in Banking and Finance from University of London.

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