Technical Analysis: Singapore Air Transport sector risk February 11, 2020 404

  • Majority of the stocks listed on the Singapore Exchange have taken a hit due to the Coronavirus outbreak in Wuhan and the situation is likely to persist.
  • The transportation and tourism sectors will be the most affected.
  • The transportation sector will continue experiencing downside risks even after the outbreak has subsided.
  • Stocks in the limelight will be Singapore Airlines and SATS, as both stocks have global exposure.
  • Bullish rebound at a lower level is possible but the technicals suggest that the rebound may be short-lived.


The cycle wave count of the Elliott wave suggests that SATS have completed its third wave at $5.35 in 2017 January. Subsequent formations of the head-and-shoulder as well as the wave analysis suggest that the stock may be heading into a complex flat (3-3-5) corrective action.

The two key potential reversal zones are between 3.05 – 3.24 and 4.10 – 4.20 that are highlighted in blue.


The weekly wave count of the potential expanded wave count shows a clearer direction of the stock price movement. Although wave B of the larger degree broke the supposed extension level of 123.6%, the price of SATS did not break or stabilise at the 161.8% invalidation level, hence the wave B is considered a weak bull run and can be regarded as a false breakout.

Subsequent wave momentum indicates that SATS is in a corrective 5-wave movement down and current price movement suggests that the stock price is on its way to form the ((iii)) leg of the greater wave C. Hence, we believe that prices may continue its further downside to between $4.10 – $4.20.


SATS’ price action analysis suggests that its price has broken the neckline resistance at $5.50 of the head-and-shoulder formation. The break below the neckline resistance suggests that the stock will continue a bearish downtrend. The stochastic oscillator also has an additional confirmation where the indicator shows a strong downside momentum whereby the K and D % line seem to be breaking below the 20 oversold line, suggesting that there is ample supply in the market to fuel the downtrend.

Therefore, investors should take a short bias trading the counter now and watch for the the potential corrective rebound between $4.10 – $4.20 highlighted in blue. However, investors should also note that there might be a swift reversal towards the bearish gap zone highlighted in red.


SIA has experienced a strong downtrend when prices failed to break higher in 2010 after the 2008 financial meltdown. The subsequent reversal at 16.52 in 2010 also indicates that SIA’s bullish momentum is limited. Chart pattern analysis suggests that the stock might be forming a descending triangle between 2008 – 2019. Although the key support zone highlighted has not been met, we believe that the rebound from the support zone may be short-lived as the dominant trend is still on the downside. The downtrend will continue unless the $9.50 psychological resistance level is broken to invalidate the descending triangle formation.


On a closer look, the stock is forming a falling wedge formation which indicates that prices may have a bullish outbreak soon. However, the bearish hammer last week shows a rejection of the gap zone which indicates a further sell down. Bearish death cross seen in July 2018 shows further evidence of a bearish trend with prices still trending below 200, 50 and 22-SMA.

Price action suggests that the potential inflection point remains at $7.90 – $8.14 as the falling wedge formation has not been invalidated. Traders looking to buy SIA could watch closely as price move towards the price zone. However, the bullish bias of the rebound may be short-lived as the supply level at 9.00 region seem to indicate a strong supply.

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