Is There A Nice Rebound In Sight For Sino Grandness?
07 NOVEMBER 2014
By: Robin Han
SINO - Rebound?
After a severe sell down from mid September to Mid October, the Straits Times Index (STI) stabilized recently. It managed to rebound from 3,150 to almost 3,300, and has already gone up by 150 points. What stock should we look out for trading purposes then?
Since the STI is on its way to stage a rebound, it could be a good strategy to find some oversold stocks that may rebound as they may have more synergy with the current tune sung on the STI.
An ideal candidate at this moment will be: severely oversold stocks that show some signal of rebound but have not moved up a lot yet. Sino Grandness is a stock that meets these criteria.
It dropped significantly from $0.685 to $0.375, a 45 percent sell down. The possible major reason for this sell down can be found from an announcement on the Singapore Exchange: a report dated on 4 September by an unnamed author claimed to have shorted positions in the company and expects the price to decrease.
However, the company already announced that the declaration of the “Report” was false and the company is “in a sound financial situation”. The recent financial report showed that revenue increased 37 percent and profit increased by around 50 percent, which tallies with the company’s announcement.
From a technical perspective, it can be seen from the weekly chart that there is a nice support level around $0.40 and the trading volume peaked up a lot when the price tested this support.
It may indicate that buyers are coming in at this support level. Another reason that made this support level even stronger is that the company declared that if the price goes below $0.40, the ongoing private placement issue will be cancelled.
This shows the confidence of the company and also indicates that the company is likely to do whatever it takes to support the price above $0.40. After a 3-4 days’ consolidation which saw price trading within a narrow range of $0.43-$0.46, the breakout of this zone is likely to be a confirmation of strength and result in further rebound thereafter. One may consider use the breakout of this zone as the entry signal to buy
This purpose of this setup is for short term trading, rather than investment. So a stop loss plan must be planned and followed closely. If the price breaks below the lower price of the consolidation zone, it may be advisable to execute stop loss.
One may also need to take note of the next earnings release, which will be released on 14 November, it is advisable to get out of the trade before the earnings release to avoid the potential uncertainty brought by the report announcement.