Phillip Securities Research - Phillip CFD

More documents

Recommendations

Info

Technical Analysis 16 October 2008 STI Daily, October 2008 200 MA 50 MA Source: Bloomberg, Phillip Securities Research For the daily charts of the STI, we see a similar occurrence of this phenomenon that occurred in the weekly charts. Last Friday’s trading session closed outside 2.0 standard deviations with a severely oversold RSI as well. Oversold readings on the weekly and daily levels are the most likely reason for the recent bounce. STI Daily, January 2008 Source: Bloomberg, Phillip Securities Research A similar case can be seen in January 2008 when price closed fully outside 2.0 standard deviations after a sharp sell off. What resulted was a small rally reverting back within the standard deviation bands. 2
Technical Analysis 16 October 2008 Previous Incidences of Deeply Oversold Conditions We will now examine some historical incidences of similar price extremes to get a gauge for how the current market might possibly behave. STI Weekly, 2001 (1) 200 MA 50 MA (2) Source: Bloomberg, Phillip Securities Research In the bear market coming off from the Dot-com bust in 2000, there were two incidences of closes outside 2.5 standard deviations with oversold RSI. Incident “(1)” during March 2001 was mild with RSI barely dipping below the oversold mark and a weak close beyond 2.5 standard deviations. As a result price drifted lower before a mild upswing and a long consolidation. Incident “(2)” in September 2001 was more similar to the current oversold condition we are seeing now. The market closed strongly outside the standard deviation bands and the RSI was deeply oversold resulting in a sharp rally. However, the main difference between September 2001 and the current market condition is the duration of the decline. The bear market began in January 2000 and the market had already been declining steadily for 19 to 20 months by September 2001. Currently we are only 12 months into the decline from the October 2007 high and the probability of a sharp rally similar in length and magnitude as the September 2001 is not high. We touch more on the duration of declines in the next section. 3
Page 1: yahgot Regional Member Companies Ph
Page 5 and 6: Technical Analysis 16 October 2008
Page 7 and 8: General Disclaimer This publication

Phillip Securities Research - Phillip CFD

Create successful ePaper yourself

Delete template?

Save as template?