Keppel Corp formed a long black candle with a shaven bottom as its price closed at the low of the session on Jan 29. The chart pattern suggests a downturn. Evident in the chart is the negative divergence between price and its quarterly momentum. As a result prices may continue to ease towards the $4.50 area before they start ambling sideways. Volume surged on Jan 29, when the long black candle formed, suggesting that this represents supply selling. Another rally is unlikely to materialise for a few months.
SEE: Safer to err on the side of caution as STI's support appears precarious
See also: Straits Times Index shows signs of decoupling from the US by outperforming
The Straits Times Index has gained relative strength against stocks such as DBS and Keppel Corp. Nonetheless, it has broken a minor support and appears poised to break below its 50-day moving average - currently at 2,881 - which had acted as a support line. The index’s next intermediate support appears at 2,795. Although quarterly momentum has not weakened significantly, short term indicators are in sharp retreat. The 21-day RSI is falling after a negative divergence with price, and stochastics has started to fall from the top end of its range. Meanwhile, ADX has started rising. The DIs are neutral but could turn negative if the STI falls further in the next two sessions. It could take a few months for the STI to stage a rally.
