STI Probes Resistance Ahead of Key Earnings Week

With the top three companies accounting for over a third of the STI’s market cap, traders should take note that they are all set to release earnings this week.

DBS has been a strong performer alongside the STI this past 3 months

As noted in our previous report, we think the STI is within a 5th wave of a 19-month impulsive rally. Yet key resistance levels loom nearby, along with the potential for some volatility from its 3-largest constituents. As the STI’s top 3 stocks by market cap account for around 36% of the STI’s weighting, their earnings report will be a key focus this week.

Tomorrow, both OCBC (Oversea-Chinese Banking Corp) and UOB (United Overseas Bank) report earnings, then DBS are on Friday (all before market open).

  • OCBC are expected to report an EPS of 0.26 and revenue of $2.59 billion. Six analysts have a ‘strong buy’ recommendation, ten have a ‘buy’ and 4 have a ‘hold’ according to Reuters.
  • UOB is expected to report an EPS of 0.59 and revenue of $2.46 billion. Four analysts have a ‘strong buy’ recommendation, 14 have a ‘buy recommendation’ and one has a ‘hold’.
  • DBS are expected to report an EPS of 0.6 and revenue of $3.55 billion. 5 analysts have a ‘strong buy’ recommendation’, 10 have a ‘buy’ whilst 4 have a ‘hold’.


9 of the top 10 stocks by market cap have risen over the past 3-months

As the top 10 stocks on the STI account for around 70% of the index weighting, it’s good to see 9 of the 10 stocks have traded higher over the past 3-months to support STI’s rally. Jardine Matheson (JARD) and Capital Mall (CAPN) have been top performers with DBS Group (DBS) a close third. Only OCBC traded lower, so the market appears broadly supported overall.

However, which ever way we look at the broader market, its near-term direction will likely be dictated by the ‘big three’ this week, especially if they all exceed or miss expectations by a wide enough margin. And that could be the difference between breaking above key resistance or falling from it.


Earnings to drive STI’s next move from (or through) resistance

As for the STI, its rally has stalled just below historical resistance levels, which rarely break upon a first attempt. 3233.86 marks the February 2020 high which was the ‘last hurrah’ before the pandemic’s bear rally took hold, and that key level sits just beneath the April 2021 high. It is therefore safe to assume these levels hold strong memories, so we would not be too surprised to see a correction from current levels.

202111The STI has paused near historical resistance ahead of key earnings reports from banks

However, before getting too bearish we’d want to see a 3180 to confirm a countertrend move on the daily chart. A break of 3180 then makes 3140 (50-day eMA), 3122 (bullish Marabuzo low) and 3088 (swig low) making viable bearish targets.

If 3180 holds as support, it may tempt ‘dip buyers’ to the table who anticipate a break higher. And taking the long-term bullish trend and strong rally into resistance into account, we do favour an eventual break higher. And volume analysis seems to agree.


Volume analysis suggests an eventual break higher

OBV (on balance volume) has confirmed the bullish trend and broken to new highs, which suggests a bullish breakout could materialise

OBV (on balance volume) has confirmed the bullish rally and even broken to new highs ahead of price action, which suggests bulls are accumulating. A strong CNY would also help but, at present, USD/CNY is holding above the key support level of 6.35. So in a nutshell, we favour an eventual upside break but need to see how the near-term direction plays out as to decipher if it will be a small or large retracement ahead of any breakout.



How to trade with

Follow these easy steps to start trading with today:

  1. Open a account, or log in if you’re already a customer.
  2. Search for the pair you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account