Stock Watch

Chart of the week – Oversea-Chinese Banking Corp (OBCB) due for potential corrective decline

Chart of the week – Oversea-Chinese Banking Corp (OBCB)

Oversea-Chinese Banking Corp (OBCB) due for potential corrective decline

Medium-term technical analysis

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Time stamped: 11 Jun 2021 at 2:00pm SGT

Source: CMC Markets

  • The current medium-term uptrend phase of OCBC that has netted a gain of +51% from its 02 November 2020 low of 8.40 to the recent high of 12.76 printed on 10 May post Q1 2021 earnings results release is likely to have reached a potential terminal exhaustion zone where the odds are now skewed towards a potential medium-term (multi-week to multi-month) corrective decline within its major uptrend phase that is still likely intact since 23 March 2020 low of 7.80.
  • Based on the Elliot Wave/fractal analysis perspective, a major uptrend phase (multi-month) can be dissected into a typical 5-wave structure; wave 1 -bullish impulsive, wave 2-corrective decline, wave 3-bullish impulsive, wave 4-corrective decline and wave 5-bullish impulsive.
  • Based on the price actions of OCBC’s on going major uptrend phase; its wave 1 bullish impulsive structure is defined by its 23 March 2020 low to 9 June 2020 high followed by the wave 2 corrective decline from 9 June 2020 high to 2 November 2020 low and wave 3 impulsive up move from 02 November 2020 low to 10 May 2021 high.
  •  The 10 May 2021 high of 12.76 is defined by a cluster of Fibonacci expansion levels with a deterioration of its medium-term upside momentum of price action as indicated by a bearish divergence signal that is flashed out by its daily Relative Strength Index (RSI) at its overbought zone. Hence, such key elements support the potential start of a corrective decline sequence for OCBC at this juncture.
  •  As long as the 12.76 key medium-term pivotal resistance holds, OCBC may see a corrective decline towards the next support zone at 11.30/10(the former swing high areas of 6/20 February 2020 prior to its steep decline that led to the capitulation of the bears on 23 March 2020 & the 38.2% Fibonacci retracement of the wave 3 up move) with a maximum limit set at the next support of 10.70 (also the 200-day moving average).
  • On the other hand, a daily close above 12.76 invalidates the corrective decline scenario for a further squeeze up towards the next resistance zone of 13.10/40.