Sembmarine – potential multi month breakout of base formation

With reference to Chart 1, Sembmarine may be in the process of breaking out a multi month base formation, as it has breached 4.60-4.61 with volume expansion.
Chart 1: Sembmarine – potential multi month breakout
Source: CIMB itrade complimentary chart (18 Oct 13)
Chart observations
1.     Chart seems to be forming a giant 6 month bottom formation. In addition, it seems to have broken from the downtrend since Apr 2011. This line is significant as it has 5 – 6 anchor points. Supports around 4.59 – 4.61 / 4.55-4.56 / 4.52. Resistances around 4.65 – 4.66 / 4.71 / 4.78.
Chart 2: Sembmarine – Broke the downtrend since Apr 2011
Source: CIMB itrade complimentary chart (18 Oct 13)
2.     Analysts are slowly becoming more positive on Singapore rig builders. The recent positive newsflow and analysts reports on Keppel Corp are likely to bode well for rig builders and to a certain extent Sembmarine. Ave analyst target is $5.00. Estimated dividend yield is around 2.9%.
3.     Volume seems to be picking up. OBV has risen to more than a six month high.
4.     All the moving averages are turning upwards, indicative of interest in the stock.
5.     There are heavy sell queues from $4.62-4.65 amounting to 1-2m shares in total with comparatively very thin buy queues.  Despite the thin buy queue, the price is quite stable. In fact, the large sell queue gives me comfort that there may be smart money accumulating Sembmarine on weakness. Why do I say that? If the sellers do have that many shares, they are likely to be professionals and are unlikely to place so many shares on each level. This would deter the potential buyers away. (P.S: Although I cannot quantify this point and it is most likely not 100% accurate, it seems to be pretty accurate for stocks such as Guocoleisure, Ezion, Nam Cheong, Sino Grandness, China Animal, etc. They seem to be a prelude of some upwards movement (though it may take some time to materialise. Readers of my writeup are likely to have taken note of this point which I frequently raised. )
6.     Sembmarine has breached $4.60-4.61 with volume expansion. An eventual technical upside target is around $4.96-5.00. This is an eventual target which may take months to reach.
P.S: Lastly, I would want to emphasise that chart reading is very subjective. FYI, I have previously emailed clients on 25 Sep to ask them to take a look at Sembmarine’s chart and subsequently two emails to alert them on 11 Oct and 17 Oct that a breakout may be likely in the near term.

 

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