Wednesday 22 February 2012

Will STI Stand Above 3000 Firmly With Greece Problems Out Of The Way?

Based on the teachings of Asian Leading Investment Guru, Mr Hu Li Yang, the only way the Straits Times Index (STI) will continue its movement upwards is when it closes firmly above 3,000 points for at least 3 days without pulling back. 20 February was the first day. Then it travelled to another box and stayed there for at least three months. In the new box, the STI is expected to continue its ups and downs. (Please refer to the chart).

In my last article, I mentioned that for the STI to break through the 3000 points barrier, and for Dow Jones Industrial Average (DJIA) to stand above 12,938 points, we need help from Greece and a good Economical Report. Last Tuesday, US’ retail sales report did not help lift the DJIA, as the released figures were below expectation. However the “lift” came on Thursday night with a terrific Jobless Claims report that is at a 4 year low.

Housing Starts report also indicates that US housing prices is about to climb, after a 4 year slump since 2007. I expect US housing prices to continue its climb this year given the US election in November and the all-time low interest rates. In fact, US companies like Lowes Company (LOW) and Home Depot (HD) also reported terrific earnings figure.

In the US, the oil tanker industry seems to have found its bottom after so many successive bad quarters. With oil prices that high, one may think that the tanker industry should be doing great. However it isn’t. The reason is that there has been an overwhelming supply of ships. With Europe in deep trouble, the whole shipping industry throughout the world has been affected.

However recently, Frontline (FRO), a famous tanker company listed in the US, recently spent US$100 millions of dollars to buy new ships, which indicates a bottom in the industry and a sure sign of confidence returning.

How can you capitalize on this? My advice is it is time to look at our local listed shipping companies like COSCO and YANGZIJIANG. They have potential to be the big plays of this year.

What is our advice for trading this week?

1) We think that the STI should stand above 3,000, and DJIA should stay above 12,938 points to move into the new box. However we expect a resistance at the 3,100 level. The STI might pull back to test 3,000 points again.
2) We expect the STI and DJIA to march forward this week.
3) However do be careful on the mid and end of next week. There might be a temporary turnaround. I would touch on the reasons in my next article.


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