Singapore Airlines (SGX:C6L) Technical Analysis

16 July 2023

 

In the last post on 8 July 2023,  we said that the SIA price was forming another Flag.   This Flag2 has now been completed as shown in the following chart. 

If the SIA price can pierce through the top of the flag pole (colored green),  we might see the SIA price makes attempts to cover the candlestick gap created on 30 July.   

 

About the Candlestick Gap

When Temasek Holdings sold away 400 million shares on 30 July,  it created a candlestick gap with a price drop of S$0.35 or 5% as shown in the following chart

This gap is not only large but also has a trading volume of 85 million shares.  This share volume was about 13 times the average 100-day trading volume.   It is definitely a “runaway” candlestick gap.

According to the textbooks,   a “runaway” candlestick would usually take months or years to fill.   Those interested to know more about  runaway candlestick can find more detail here

 

Why are They Selling?

SIA has been performing rather well after the end of the pandemic.  In 2022,  It has posted the highest net profit in its entire 76 years of operation.   Some traders have expected the 1Q2023 earnings to be even higher.   Then why are the big players selling? 

Earlier on,  we posted that the broker houses and the analysts expected 

a)   A tapering in the number of air passengers,  leading to a decline in earnings.  

b)  The SIA to spend

 1) Billions to redeem the mandatory convertible bonds (MCB) they raised in March/April 2020.   

2)  A lot to renew its aircraft fleet, plus

c)   The SIA to allocate funds for the merger of the Vistara/Air India group. 

One other reason that has not been speculated so far is whether the SIA price has been running up too quickly too fast in 2023.

Is SIA Price Running Too Quickly Too Fast?

Presently, the World’s 5 best airlines in 2023 are

1.      Singapore Airline

2.      Qatar Airways

3.      ANA All Nippon Airways

4.      Emirates

5.      Japan Airlines

Except for Qatar Airways which is 100% Qatar Government owned,  the rest of the airlines are listed companies where we can compare their stock prices. 

It can be seen from the following chart and the table that SIA price has indeed been running way ahead among the airlines for the last 6 months in 2023.  Its price has more than  doubled the prices of other airlines

 

Going forward,  we would expect very strong resistance for the SIA price to break the top of Flag2.  It would be even harder for SIA shares to cover the candlestick gap unless the big players can reverse their earlier decision and decide to enter the market again.  Breaking up the resistances can only happen soon if the SIA's 1Q 2023 results to be announced on 27 July are so unbelievably good,  prompting players like Temasek Holding to regret and to buy back the SIA shares. 

8 July 2022

In the past week after Temasek Holding sold 400 million SIA shares and after 3 or 4 broker houses and analysts downgraded SIA had set a target price of S$6.80,  the SIA prices have been going strong as shown in this stock chart. 

We can clearly see that the market wasn’t ready to send SIA down immediately. The SIA prices have defied and made an attempt,  trying to recover from when the prices closed up from a one-month low of S$7.15 on 30 June to S$ 7.32.  The price gained about 2.3% for the week.

Isn't the Price going down to S$6.80?

No one can tell at the moment as this has not happened yet.  There is nothing concrete about the target price set by the broker houses/Analysts. The price could change due to traders' sentiment and prevailing news. Temasek Holdings can also make the price jump again for example. 

This technical chart is showing exactly the situation.  

The SIA price is presently raising its head above the trendline T1.  It is ready to head higher as long as it can stay above this trendline T1.  However,  we are spotting another bearish flag being formed.  It is marked as flag 2.   This flag would take the SIA price higher to about  S$ 7.40 before touching the flag top and before deciding if it is going to go down again.

Can the Bearish Flag Pattern Fail?

There is nothing concrete about the result of any kind of analysis.  This is especially for stock Technical Analysis.  They can only be used for reference.  

Technical Analysis is only telling us that there is a possibility or there is a potential.  They cannot tell us about the minds of the traders and what they are going to do next. 

There are many examples one can find on the Net about how Technical Analysis had failed;  for example,  a bearish flag can turn out to be a bullish flag in the end.  

Here is one textbook example  This webpage is giving us some advice on how to spot a  bearish or bullish flag and how to trade when that happened.

How to Spot a Failed Flag Pattern?

The textbook has this to say:

A properly formed flag would have the following features:

1.   1.     Trading volume should increase just before the flag is formed;

2.   2.     Trading volume should then decrease while the flag is being formed;

3.   3.     The price should touch the top  of the pole for a bearish flag or vice versa to complete the flag;  finally and most importantly;

4.   4.     The volume must increase again when the price breaks the lower flag pole for a bearish flag or the upper flag pole for a bullish flag.

The SIA price pattern fits exactly these descriptions for a bearish flag to be formed.

Going forward,  traders are advised to be on alert and watch how the price form the bearish flag.

8 July 2023

Singapore Tourist Arrivals 2023

The tourist arrivals to Singapore were around 1.1 million for June 2023 as shown in the attached picture. This figure has been maintained over the last 3 months and doubled over the year as compared to 543,000 in June 2022.  The Singapore Tourism  Board (STB)  has predicted that Tourist Arrivals to Singapore would be in the range of 12 to 14 million in 2023.  To date,  tourist arrivals to Singapore have risen to 12.59 million,  which is an increase of about 586% YOY.

30 June 2023

Temasek Holdings Selling $400 million worth of SIA shares

This news about Temasek Holdings selling SIA shares has caused Singapore Airlines (SIA) share price to tumble and lost 4.76% or S$0.35 per share today.   It has also formed a glaring candlestick gap as shown in the following chart.

Temasek Holdings explained that it is always their routine "to reshape and rebalance their portfolio so that they can deliver sustainable returns over a longer term."  Temasek Holdings also said it would continue to be a significant shareholder in SIA with a 53.5 percent stake.

While some market investors and traders have taken this reason for granted and expected the SIA stock to return to its former shine,  many others were trying to understand why Temasek Holdings was selling those SIA shares especially when the SIA share prices were so bullish lately.

What are the Reasons to Sell?

The following reasons were speculated.  Temasek Holdings was:

1. Taking a profit;

2. Expecting a decline in the SIA’s earnings or

3. Diversifying and channeling profits for another business

The SIA Rights Issues

In March/April  2020,  Temasek Holdings took up about 986 million rights shares issued by SIA.   Then the right issue was S$3/=  per issue.   In addition,  Temasek Holdings has also taken up S$1.94 billion of mandatory convertible bonds (MCBs).

For this reason,  some netizens claimed that Temasek Holdings could earn a tidy profit of over S$1.8 billion by selling away 400 million shares.  But this reason could not hold water because Temasek Holdings' remaining 53.5 % stake would be severely affected by the stock sale.  Therefore,  the better reasons would be point (2)  or (3) with point (2) being more likely.  

The Brokers' and Analysts' Analysis

Some brokers and Analysts have turned more cautious lately about buying SIA shares.   They expected a tapering in the number of air passengers,  leading to a decline in earnings.   They also expected SIA to spend billions to redeem the mandatory convertible bonds (MCB) they raised in March/April 2020.  Furthermore,  SIA was also expected to spend a lot to renew its aircraft fleet plus they would have to allocate funds for the merger of the Vistara/Air India group. 

As a result,  many Brokers and Analysts have called to downgrade the ratings of  SIA stock.  For example,  PhillipCapital has reduced SIA's target price to S$6.80 while DBS has downgraded SIA to ‘hold’ with the same target price of $6.80.  POEM also reduced its ratings and  target price 

Example of what would happen?

A good and similar example is when Temasek Holdings sold about 3% or 62 million shares on 11 March 2012 or 12 years ago.  That stock sale reduced Temasek Holdings' stake in Sembcorp Marine Ltd (SM) (S51.SG) from 63.95% to 60.91%. Then SM's stock price was about S$3.05 (adjusted price).  The sale caused the price to drop 5% on the next trading day and a candlestick gap was formed as shown in the following chart.     This candlestick gap was covered within the next 2 weeks.  The price then fluctuated between S$2.30 and S$3.00 for the next 6 months.  It dropped by 7.7% in November when SM reported a 48% fall in the net profit for 2Q 2012.

What is the Takeaway?

In the SM example,  Temasek Holdings might have done its due diligence and found SM would have a bad 2Q report.  Temasek Holdings could reap a tidy profit of S$49 million without losing a single share if they were to buy and replenish back the 62 million shares after the 7.7% drop in November 2012.  

Would the SM's example repeat in SIA?

The example might be repeated in SIA.   In fact,  it could be repeated again and again anywhere. 

Let's examine the SIA's stock chart closely.  The chart is showing that SIA stock has formed a bearish flag as marked in red.   This flag has a target price of S$6.86 according to the technical books.  And this S$6.86 also happened to be a strong "technical support" for the SIA stock.  It is also the target prices of the 3 brokers/Analysts that were quoted earlier.   Like the SM example, the SIA price might have a leg down to find solid support at around S $ 6.80.   It is also very likely the candlestick gap formed today would be filled sooner or later.

Whether the SIA would have a bad 2Q or the 3Q report in 2023 like SM in 2012 would be anybody's guess.   But it would be advisable for investors to be cautious and do the necessary due diligence before buying or loading more SIA shares.

 

Disclaimer:  This article is for information and educational purposes.   Readers are advised to conduct their own research and study to make their own investment decisions.