sg stock focus city developments retreated from inflection zone risk of further downside 1852922017

Medium-term technical outlook on City Developments (SGX: C09)

(Click to enlarge charts)

Key technical elements

• The recent year-long rally from January 2016 low has been stalled recently at a significant medium-term resistance zone of 10.97/11.00 which is defined by a confluence of elements. Firstly, it is the lower boundary of a long-term descending channel in place since December 2012 high. Secondly, the upper boundary of a medium-term ascending channel from January 2016 low. Thirdly, a Fibonacci cluster (61.8% retracement of the multi-year decline from Oct 2010 high to Jan 2016 low & the 1.236 projection of the up move from Jan 2016 low to 21 Apr 2016 high projected from 19 December 2016 low) (see weekly chart)
• The weekly RSI oscillator has flashed a bearish divergence signal at the 75% level which is slightly below an extreme overbought level of 78% seen in January 2017 that led to a major top of 17.90 printed in April 2007 (prior to the 2008 Great Financial Crisis). In addition, the daily RSI oscillator had broken its corresponding support at the 51% level and shows room for further potential downside before it reaches at extreme oversold level of 18% seen in December 2015. These observations suggest that the recent medium-term upside momentum that led the price action of the stock to print marginal new highs has started to wane.
• The intermediate resistance now stands at 10.65 which is the pull-back resistance of a former broken down trendline support from 27 December 2016 low that has been tested by its price action on 26 May 2017 before it staged a retreat.
• The significant medium-term support rests at 9.24/8.88 zone which is defined by the lower boundary of the aforementioned medium-term ascending channel in place since January 2016 low, the former congestion swing high areas of 21 April to 06 October 2016 and close to  50% Fibonacci retracement of the year-long rally from January 2016 low to the recent 11 May 2017 high.

Key levels (1 to 3 months)

Intermediate resistance: 10.65

Pivot (key resistance): 10.97/11.00

Supports: 9.71 & 92.48/8.88

Next resistance: 11.98/12.46 (gap)

Conclusion

The current year-long uptrend from January 2016 low of 6.61 has started to show signs of bullish exhaustion. As long as the 10.97/11.00 pivotal resistance is not surpassed, City Developments may start to undergo a retracement of this current year-long rally and shape a potential multi-week corrective decline to target the supports at 9.71 follow by 9.24/8.88 next.

However, a clearance above 11.00 is likely to invalidate the preferred bearish corrective decline scenario to open up scope for a continuation of the up move towards the next resistance of 11.98/12.46 (gapped down seen on between 11 January and 14 January 2013.

Charts are from eSignal

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this email, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs. All queries regarding the contents of this material are to be directed to City Index, a trading name of GAIN Capital Singapore Pte Ltd.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.