Singapore stock analysis - Yangijiang Shipbuilding

China-based shipbuilder Yangzijiang has been able to deliver the ship vessels as scheduled this year. The company has successfully delivered 11 vessels year-to-date. Another 29 vessels are to be delivered until the end of this year and the company in confident it is able to fulfil the delivery. Total value of vessels delivered so far in 2009 stands at US$445.9 million and order book is currently at US$6.43 billion with delivery schedule stretching out to 2012.

The economic improvement in the region especially China has increased investors’ confidence in buying this company’s shares and the recent analyst’s price upgrades has also helped. In March this year, Yangzijiang’s share price was around $0.37 and its lowest ever price was $0.29 in October 2008. Today, the price is at its 15 months high at $0.975, 163% higher from the low in March. While the benchmark Straits Times Index has already retraced 50% from the October 2007 to October 2008 bear trend, Yangzijiang’s price has only retraced 30%. There is still room for price to go higher.

Moving averages (30, 60 and 90-day moving averages) are in convergence upwards which means that the underlying uptrend is strong. This is further supported by the momentum indicators. The Relative Strength Index (RSI) and Momentum indicators are making new highs showing that the bulls are in control. The Average Directional Index which is increasing shows no sign of weakening bullish momentum. Therefore, based on these indicators, there is a high chance of price going higher.

However, the price has been going up quite steeply and normally a steep upward movement can’t be sustained. The fall on Friday shows how sharp a downward correction can be. The uptrend is a parabola in nature, which can be defined in the parabolic arc line in the chart below. Normally, a steep correction downwards will take place if the parabolic arc is broken. But if it is able to rebound from the arc, we may see another strong rally upwards.


Daily Yangzijiang chart with volume as at 7 August 2009 using NextVIEW Advisor Professional

Price is expected to test the parabolic arc, which is currently at $0.94. When price comes to this level, a rebound may create a buy opportunity for short term traders. A rebound can be detected from indicators like bullish candlesticks reversal patterns. However, if price falls further, in can be a steep one so traders need to be very cautious. The 3-day Average True Range (ATR) currently reads $0.06 and therefore a suitable stop loss for a trader to consider is $0.06 from the buying price.

If the arc is broken, the price may find support at $0.87, the S1 up trend line as plotted in the chart. The upside target for Yangzijiang is $1.20 and this can be achieved as long as the price stays above the S1 up trend line.

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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.