China Aviation Oil

China Aviation Oil (G92): BREAKOUT

Commentary:

Oil price (BRENT) continues to trade above US$50/bbl amid recent sell off. Higher oil price is beneficial as it helps boost the company's trading profit. Company will be announcing its 1QFY17 earnings on 19 Apr 2017.

Technical Observation:

China Aviation Oil (G92) broke out this morning from its Re-accumulation Zone which lasted 6 months since Jul 16. Volume is encouraging on rally and momentum (using MACD) remains bullish with recent bullish crossover. This gives positive indications that the stock is likely to enter into a new Mark Up Zone which may see the stock trading towards 423.6% fibonacci projection at S$1.92, probable high of the Mark Up zone.

Probable Trade Plan as follows:

TP: S$1.92
EP: S$1.61
SL: S$1.51
Risk/Reward: 3.1x

Wyckoff's Law of Effort

Law of Effort Wyckoff's Law of Effort states that on any single trading day (or week depending on time frame), huge volume (effort) push by participants should see huge price movement, resulting in a wide spread (long body). This is a basic principle of effort and result. However, as per Singtel's case study, we saw huge selling volume on 11 May, yet the price action only shows a narrow spread (small body). This divergence of effort and result in Wyckoff's Law of Effort principles, indicates possible exhaustion in selling or hidden buying. Thus, with a lack of weakness, Singtel should continue trading range bound for the coming days or weeks till further strength or weakness is observed. Swing Traders who trades range can consider positions at 3.70-3.72, with exit target 3.76-3.78.

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