I have a quick post today on the Hang Seng index. While the STI consolidated in a downward parallel channel for the most part of the latter half of 2011, the Hang Seng formed a fairly large symmetrical triangle. Participating together with the other global indices, the Hang Seng index surged up recently and posted a 6.5% rise to break out of the symmetrical triangle. A quick projection based on the triangle puts the Hang Seng at the 23,000 region. I do not expect the Hang Seng to get up there so quick, so that will probably be a 4-, 5-month target. Right now, the 200-day MA is in play. In fact, it has been quite some time ever since the Hang Seng approached near to the 200-day MA. I am somewhat expecting a slight retracement for global indices since the recent upside we are seeing will have to take a breather. So, what better time for the Hang Seng to meet her 200-day MA.

A chart of the Hang Seng SGD1 contract on IG Markets:

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The US Dollar has finally cracked downwards after sideways consolidation for the last several weeks. Seeing a triangle formation on the USDSGD chart – http://technicalanalysistalk.wordpress.com/2011/12/23/forex-triangles-watch/ - I was ready to either long USDSGD if it broke through significant highs, or – like what you would have seen in the link above, I was building a short position slowly, waiting for a crack towards the downwards. Thankfully, the USDSGD fell through support lines and is now trading at the 1.25 region. A straightforward projection will be to take the height of the triangle and project it downwards from the breakout. Take a look at the chart below. What will this simple projection give us? 1.22 region. In other words, this triangle breakout should put the USDSGD rate back down near historic lows. Am I going to keep my short all the way till the USDSGD touches 1.22? No, I will take profit and continue monitoring and executing short-term trades. If there is anything I have learnt in the forex market, it is that rates are very volatile and even more should stops be placed with care. Expect the unexpected! The money is on the table, so I will take it while I can!

Anyways, this site is technical analysis – oriented and not about my trades. So that is about it, let us watch and see if USDSGD returns back down to 1.20.

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In my last post on the STI, I showed you all a worrying picture looming on the chart of the STI – a downward parallel channel. At that time, the STI was hovering dangerously at the bottom of the channel around the region of 2620. Thank goodness – and true to the parallel channel pattern – the STI rallied all the way up to overe 2800. Right  now, I see the STI as trading at the top of the channel. Now, any more upside on good volume will be very much welcomed. If we can kiss the 2800-2900 region goodbye, then I must say there is more and more chance of the STI breaking through the 3000 barrier soon. For now though, we can only sit and watch. Let’s hope for the best.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Sorry for the inactivity. The past week has been a busy one for me as I get ready for the lunar new year.

Today, I have a chart of Yangzijiang. Yangzijiang – BS6.SI – recently broke out of a symmetrical triangle. I may be a little late on this breakout, so I do not think I will go in, but it is still worth watching. So, basically we draw our trendlines, which should be converging into the apex at the end. Volume is good as well (yellow arrow) - we have descending volume throughout the duration of the triangle. And on breakout days, volume shot up nicely to give us confirmation of the upward breakout. So the target based on this triangle pattern will be the $1.14 region. Right now we are halfway there, so in not much time we should get up to the target if all goes as expected.

By the way, a side lesson that we can learn from this chart is the beauty of a MACD price-indicator convergence. Take a look at the two black arrows on the charts. Price made a lower low, but the MACD made a higher high. What happens next? Yangzijiang posted a 20% run upwards. Of course hindsight is on our side, so we can praise technical analysis very much here. But, really, the divergence/convergence indications from the MACD is very powerful. I hardly see a failed one. Keep this tool in your technical analysis arsenal.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Today, I shall post my view on the equity market for the year ahead. I was quite bullish last year, but sadly the STI decided otherwise and ended up down 17%. Nevermind that. My long-term analyses are just to give me a broad overview/forecast of what I see on charts presently, and what I am expecting to see. I do not trade or invest based on my long-term views as I prefer short-term trades where I can be more flexible in cutting losses or taking quick profits and such. I believe it is imperative for short-term traders to also zoom out of daily/intraday charts and take a good bird’s eye view of the market once in a while. So, what better time to do that than in the first several days of the beginning of the year?

In the chart below, you will see a weekly chart of the STI ranging from the middle of 2006 to where we are now. In general, 2009 was a fantastic year; 2010 was a testing one, though bulls who rode out the volatility won; and 2011 was a dissapointing one for those hoping for a continued rally (like me). Anyways, what is past remains history, which is what we see and use on the charts. Lately, I have been worried with a sign I am seeing on the charts at the moment. Before I get to that though, let us look at some fibonacci levels. I will take the high in 2007 and the low in 2009 as the 0% and 100% levels. In 2010, a support zone of 2650-2700 came out. After a strong rally in the second half of 2010, we never needed to look at 2650-2700 again. Fast forward to 2012, 2650 is the vital 50% retracement level based on the post-crash high of about 3300. So straightaway, we have two events on the chart telling us that where we are now – friday’s close of 2715 – is a very important support zone. Bring in the 200-week moving average – hovering at about 2700 presently – and we should establish this zone as very important.

Now, the reason why I am worried looking at the chart of the STI is that a large head and shoulders seems to be in the making. Where is the neckline of the potential head and shoulders? Approximately 2700.

I do not like purely speculating on patterns that are not fully formed – which means they should be confirmed with a breakout – but I will sound out the alarm and monitor a chart if I see something interesting; and here, we have a large head and shoulders. Based on basic technical theory, an upright head and shoulders should mean impending downside. But, my belief is that most, if not all, patterns can lead to both upside or downside. The trigger is to wait for the breakout. (Yes, there are failed breakouts here and there, but that is another story, and for me, I do not see it happening a significant number of times). However, most head and shoulders that are large in size – the potential one on the STI is at least 2 years old – usually signal downside. Basically, what we are actually seeing is price making a rounded top, and because of its massive size, it means a market has turned and something in the real world will trigger the collapse. Case in point: Look at the STI’s movement in 2007 and 2008. The market rallied hard coming from the multi-year bull run after the dot-com fiasco, made a top at 3800s, then dropped back down to 3000 for consolidation. What the big picture looks like is a rounded top. And such an event on the chart usually has the same psychology as an upright head and shoulders. So, once breakout is seen, we look for serious downside. Using hindsight, we can see this phenomenon unfolding from 2007 to 2009.

It does not just happen in the STI’s chart in 2008, take a look at the charts below. First, we have the S&P 500. Back in 2000-2001, the market rounded, fell below the 200-week MA and there was no turning back after that. The multi-year bull run ensued after a bottom emerged by June of 2003. Once again, the S&P 500 made another rounding top in 2007, and we all know what happened after that.

So, this is one tool I have learnt to use in finding mid- to long-term market reversals. So, now it seems like I am bearish on the STI for this year right? Well, the “catalyst” is the breakout. Will we see the STI break through the neckline convincingly and staying down? If we get that, then I have to say I will be on the side of those naysayers who keep harping on how we are starting to see the crack from a double-dip recession. I am hoping against all hope that that is not what we get. But if the charts tell me so, then I have no choice as a chartist but to look for some serious downside.

As the year 2011 draws to a close, I will write about my year regarding technical analysis. Equity-wise, I did not do too well. Though, I did have a good year in the forex market. Anyway, I will put up long-term charts on the equity indices next year. For now, I am seeing events on the charts of US indices. Let’s take a look at them.

The S&P 500 ended the year flat, though we had alot of volatility throughout the year. Looking at the chart below, you can tell US stocks traded in two separate regions. The dividing level was 1275 for 2011. Going back to 2010, you can see an important resistance level at about 1220 (red line). After the US debt downgrade this year, the S&P 500 found resistance right at that level too. Though, that line did get violated (in purple box) towards the downside after we broke through once; if I’m not wrong I had a post about that. Anyways, the important thing is that we are clearly above 1220, and looking to test the important 2011 level of about 1275. We did break through it once this year, only to reverse all the way down. So, in the short-term ahead, any upside should get up up and above the important resistance level of 1275.

Now, my post today is centered on an unconfirmed chart pattern I see on the US indices’ charts. Flirting around the 1220 level, the S&P 500 ended up forming an unconfirmed inverted head and shoulders. If you have been following my last few posts, you will know I identified an unconfirmed, good-looking inverted head and shoulders in the STI, that now seems to have fizzled out into either a failed pattern or one with unexpected downside breakout. Nevermind that, I believe in sticking to my guns and not giving up after a failed pattern. Once again, I will be leaning towards the bullish side for US indices because of this inverted head and shoulders. The pattern comes at a time when the S&P 500 is looking to break through the resistance that was once support before the US debt downgrade. So, what better than a chart pattern to act as a catalyst for a rally past the resistance? Key support for this unconfirmed pattern is 1200. If we do experience selling pressure instead of buying pressure in the weeks ahead, 1200 is the leel to watch. Breaking down below 1200 means one of two things – we have a downward breakout from the inverted head and shoulders, or we ahve to render the pattern invalid and take it off the chart.

The next few charts you see below are charts of US indices with the small inverted head and shoulders.

Finally, I have a longer term view of charts of certain indices to show you all. Is a huge head and shoulders in the making?

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I have a chart of ComfortDelGro for today.

I am seeing an unconfirmed inverted head and shoulders in ComfortDelGro, C52.SI. Just to explain what I mean by unconfirmed: an unconfirmed pattern in my book is a pattern that is quite pronounced already – mature – but a breakout is yet to be seen. The risk in trading unconfirmed patterns is that you do not have indication of future price direction by a breakout. Anyway, ComfortDelGro will be meeting with strong resistance from the 200-week MA. Once broken though, expect some more upside to the $1.60 region, where C52.SI will test post-crash highs.

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Seems like there is no strong Santa rally this year. Despite hoping as hard as ever for a rally in equities, the STI sunk below 2700. The inverted head and shoulders I identified in earlier posts is looking more and more like a failed pattern, or one with a downward breakout. I am not going to give up on upside yet though. The last week of a calendar year is not usually a “normal trading week”, so anything can happen. I am going to wait till next January before finally giving up on upside in equities.

Anyway, a fear I had in the past couple of weeks was that we may be in a downward parallel channel. Take a look at the chart below to see what I mean. For a while – in the head of the head and shoulders – the STI did dip below the channel, but we went straight back up again. If we continue to stay within the boundaries of the channel, then  I will keep this pattern on my chart of the STI instead of the inverted head and shoulders. Another thing to note is that the STI is below the 200-day MA, and the 200-week MA (not shown). These are strong bearish signs that should not be ignored. I am still hoping for a recovery out of this whole consolidation, but if need be, I will have to change my view on the general market direction.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Today I have two currency pairs on my watchlist. Both are showing signs of a triangle pattern in formation.

First, I have the USDSGD pair. I am bearish on the USDSGD in the long-term. In the past, I made some money off this pair by shorting whenever there was a rally. In the month of Septemeber of this year, however, the USDSGD rate shot all the way up to the 1.3000 region. From here on, it became quite volatile and no clear direction, with lows testing 1.2400 and highs going above 1.3000. This may sound like some kind of chart pattern was in the making right? To me, yes, I see some kind of triangular pattern on the chart. This means a big, clear move should be coming up soon. As you can see on the chart, I am building a short position ahead of a breakout because I am confident in longer term downward movement for the USDSGD. I have stops and plan Bs in place in case I am wrong. For now, let’s continue watching the USDSGD rate.

The second currency pair that cuaght my interest is the USDJPY pair. I have not much to say except that a nice and small triangle seems to be in the making. And if it turns out to be a confirmed triangle, right now it looks to be in the mature stage. I have plans to trade this pair, but for now only time will tell if the triangle breaks out in a certain direction.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

I will be overseas for the next 11 days, and will not have the chance to upload any charts or new posts while away. I hope to see you all again when I resume posting here. I should get in a chart or two just before christmas.

Thank you all for your support