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Monday, April 10, 2006

Singapore market

Singapore market- Recent pullback in the ST index came largely on the
back
of weakness in property stocks along with pullback in prior favorites
such
as SGX and SIA. Banking stocks have picked up some of the slack and we
note
that the SGX Finance index is now trading at new highs for the year.
The
sector should very likely lead the index up higher in the coming days.
Small cap stocks have also along with the ST index and market players
are
becoming increasingly selective. Preferred plays remain China related
small
caps. The tendency however is for some of these stocks to rise sharply
and
then consolidate for a lengthy period. This leaves a very narrow window
of
opportunity for traders.Given such a scenario, the best trading
strategy we
advocate readers is to buy on weakness, when a stock consolidates on
low
volume and volatility and then to sell when the volatility expands.
This is
essentially a contrarian trading strategy.


Stocks

A potential theme that could emerge in the coming days could be
speculative
interest in oil and gas related small caps. Brent Crude Oil continues
to
trade near the upper end of the US$70.00-US.60.00 trading range. The
commodity is currently trading at US$68.30. If the commodity breaks
through the US$70.00 barrier, speculative interest could once again in
return towards small cap oil and gas plays. We feature some popular
small
cap oil and gas plays.


China Petrotech- The company essentially provides IT solutions to oil
and
gas companies in China. The stock had rallied sharply from $0.33 to a
high
of $0.74. It has since eased back to $0.68. Immediate support is at
prior
low of $0.67 and next support at 30 day moving average zone of $0.64.
Volume on the current decline is so far relatively low. However we
still
need to watch the important support at $0.67. If this level holds, then
the
stock could rebound to test its prior high of $0.745. Even so, we thnk
that
Sky China Petroleum, offers lower risk at this stage. The stock is
trading
at 15.4x historical earnings.

Sky China Petroleum- The company provides engineering solutions to
oilfields in PRC. The stock has been trending up since early 2006,
however
pace of rally has been more gradual compared to China Petrotech. over
the
past 2 weeks, the stock has corrected from a high of $0.625 to a low of
$0.555 as of yesterday. The stock is close to a trendline support zone
near
$0.545-0.55. Volume has also been relatively low on recent
decline,suggesting a high likelihood of a rebound of the zone. We
recommend
that readers watch the support zone and establish a long position only
if
the stock stabilizes or rebounds off that zone. The stock is currently
trading at 12x historical earnings.

(See attached file: SKY Petrol.jpg)(See attached file: China
petrotech.jpg)
Best Regards

K Ajith

64195411

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