Singapore Stock technical Analysis - Capitaland

Speculations in the property market that it may rise because of recent buying activities. However, the prices of property stocks have been stagnant with a slight bearish movement for the past one month. Property stocks have been on a good bullish rally from March. The FT Real Estate Index jumped more than 80% from the level in March to June. I guess that the prices of properties stocks have gone too far ahead of the fundamentals.

One of the biggest real-estate public–listed companies in Singapore is Capitaland. Capitaland’s share price in March was around $1.90 and it went as high as $4.00 in June. This is more than a 100% increase. The share price, as at 3 July is $3.61. For the past one month, the price has made short-term lower highs and lower lows. Technically this means that the price is in a short-term down trend. This can also be confirmed by the short-term 30-day moving average which has started to decline a few days ago.

In the longer-term time frame, price is still in an up-trend. The 90-day moving average is increasing and is 16% below the current price. The momentum the up-trend is weak. Based on the Relative Strength Index (RSI) indicator which has gone below 50 (the mid level that separates the bulls and bears strength), the bears have started to dominate to market. The MACD indicator which started to show bearish momentum since early June continues to show bearish strength.

However, there is no strong selling pressure seen in the past one month as trading volume has been declining for the past one month. The price movement for the past one month has formed a correction pattern on the chart called the “wedge”. This is a trend continuation pattern. These indicators suggest that the price is more likely to be in a correction than a selling pressure. The trend continuation depends on the completion of the wedge pattern.

At current price level, the correction is not over until price moves to $3.20. If it does go below $3.20 then selling pressure may begin. So, there is still some room for price to go lower in the short term. During this correction, the up-trend may start to continue its journey if it breaks the resistance level of the wedge pattern which is currently at $3.70. Therefore, the price of Capitaland is still in a corrective mode if it stays between $3.20 and $3.70.

If the price continues its trend, the technical price target is $4.60 with a resistance at $4.10. Recently, many analysts have upgraded the target price for Capitaland from below $3.00 to between $4.00 and $4.60. Immediate support level is of course at the wedge support level at 3.20 and further below is at $3.00. The weekly Average True Range (ATR) for the past three weeks is $0.32 or 9% from current price. A stop loss should not be lesser than this ATR to give the price enough room to move.


Daily Capitaland chart as at 3 July 2009 using NextVIEW Advisor Professional



Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.