Using Fib Retracement to gauge relative strength
We discussed recently the movement of the Straits Times Index and its performance based on Fibonacci Retracement. The charts tell us that the Straits Times Index could not penetrate the highs set in 2007 when trouble from Lehman Brothers and AIG affected financial markets. Movement over the past 2 years was merely retracement. This is a statement of relative strength. Comparing then and now, the Straits Times Index is weaker than before.
Then yesterday, I pinned this chart of UOB Bank on Pinterest. It prompted a question from a fellow investor who asked ‘What about OCBC’? Good time to bring up a discussion here.
UOB has the same setup as the Straits Times Index
Fibonacci Retracement can tell us market psychology, strength between and within
I made this posting previously ‘Market psychology at important fibonacci retracement levels‘. The posting talks about important fibonacci retracement levels that readers may find useful. But fibs provide other input too:
- Price going beyond 100% fibonacci retracement is in fact a new trend, not retracement anymore.
- How high price retraces up in UOB setup depends on bull-bear strength. Only strong-bull-weak-bear combination can push price up to high retracement levels.
Based on these two input, we can interpret the strength of Singapore banks UOB, OCBC and DBS both within and between. Within looks at their own relative internal strength between multiple periods in time. Between looks at their relative strength to one another.
Which Singapore banks are stronger – UOB, OCBC or DBS?
UOB (SGX:U11, United Overseas Bank)
- Price unable to reach 2007 high. Retracement only.
- Price has grown weaker.
- But bulls are fairly strong to be able to reach 76.4 percent fib retracement.
OCBC (SGX:O39, Oversea-Chinese Banking Corporation)
- Price exceeds 2007 high and is powering new highs, new trend.
- Highs in 2007 and 2010 become support (green zone) instead of resistance.
- Technically, she is stronger than before and stronger than the other two banks right now.
- But very long trend line (red) appears broken so market may see it less positively.
DBS (SGX:D05, DBS Group Holdings)
- Retraces to 76.4 fib retracement but previously to 61.8.
- Bulls are not as strong as what we can see in UOB setup.
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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.
Soh's Twitter account @sohtionghum
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"I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."