SIA Ltd – Daily timeframe
*Entry Price: 9.78 Stop loss: 9.39 Take profit: 10.27
*SIA Ltd will be added to the Phillip 20 Portfolio once the trade is triggered
Price has been moving in a steep downtrend since May after the 11.75 resistance area reversed the bullish momentum. The selloff worsened recently with price testing a new 4-year low of 9.50 in early August.
Nonetheless, since testing the 9.57 support area and 9.50 psychological round number, the bearish momentum seemed to be decelerating. Instead of breaking new lower low, price has been consolidating around the 9.57 – 9.50 support area since 10/08/18. Moreover, with the current bullish price action, price might be bottoming out soon.
With the recent prolonged selloff, the Relative Strength Index (RSI) has also signalled oversold condition since 01/08/18 with the RSI hitting an extreme low of 27 on 13/08/18. RSI measures momentum. A reading above 70 represents overbought condition while a reading below 30 represents oversold condition. The last time the RSI was oversold was in July. Price eventually rebounded 6.2% as the mean reversion took place.
Thus, couple the oversold RSI with the recent bullish break above the immediate downtrend line suggests a reversal higher next. Note that the bullish break on 21/08/18 was backed by increasing volume as well. Expect price to rebound higher next to test the 10.02 resistance area followed by 10.27.
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