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SG Equities Technical: Minor pullback for United Overseas Bank before a potential new corrective rebound


United Overseas Bank

Medium-term technical analysis (1 to 3 months)

(click to enlarge chart)

(click to enlarge chart)

Time-stamped: 28 Jul 2022 as at 5:30 pm SGT

Source: CMC Markets & TradingView

The big three Singapore-based banks that have a significant combined market capitalization weightage of around 41% in the benchmark Straits Times Index (STI) will report their respective Q2 earnings starting with United Overseas Bank on Friday, 29 July followed by Oversea-Chinese Banking Corp on 3 August and lastly, DBS Group on 4 August.

All three banks’ Q2 earnings results will be announced before the opening session of the Singapore stock market. Interestingly, the share price performances of Singapore banks have started to shape a U-turn after trending down since mid-February 2022. Based on 2022 year-to-date performance as of 28 July, United Overseas Bank and Oversea-China Banking Corp have recorded gains of +7% and +5.1% respectively that outperformed the benchmarked STI (+2.8%). In contrast, DBS Group underperformed with a negative return of -0.9%.

Also, the recent rebound seen in the three Singapore banks has taken shape in conjunction with the ongoing relief rebound seen in global equities as highlighted in our Q3 2022 Global Markets Emerging Theme published earlier this month click here to read; Part 1, Part 2, and Part 3.

Let us analyse United Overseas Bank (UOB) from a technical analysis perspective.

Key Levels (1-3 months/UOB)

Intermediate support: 27.35

Pivot (key support): 26.80

Resistance: 28.50 & 29.55

Next supports: 25.30 & 24.00

Directional Bias (1-3 months/UOB)

The recent rebound of 9.5% seen in the share price of United Overseas Bank (UOB) now faces the risk of a minor pull-back below 28.50 intermediate resistance towards the 27.35 intermediate support. If the 26.80 key medium-term pivotal holds, UOB may shape another corrective rebound leg towards the next resistance at 29.55.

On the other hand, failure to hold at 26.80 with a daily close below it invalidates the corrective rebound scenario to kickstart another impulsive down move sequence within its major downtrend phase towards the next support at 25.30 in the first step.

Key elements (UOB)

  • The price actions of UOB are still capped within a major descending channel in place since its all-time high of 33.32 printed on 17 February 2022 which suggests that there are still no clear signs of a major bottoming process and any rebound in price actions that materialize are likely to be corrective in nature. Therefore, in the longer term, UOB may resume its impulsive down move sequence to break below the recent 15 July 2022 low of 25.95.
  • Recent price action of 28 July has staged a gapped up and ended the session with a “Spinning Top” candlestick pattern right below the 28.50 intermediate resistance which also coincides with the 200-day moving average. These observations suggest near-term exhaustion in the recent bullish movement which increases the likelihood of a pull-back in price actions at this juncture.
  • The daily RSI oscillator has continued to inch higher after its bullish breakout above its former key corresponding resistance the 48% level. It has not reached an extremely overbought zone of 78%/86%. Hence, such an RSI reading suggests that the medium-term upside momentum of price actions is still intact which in turn supports a further potential corrective rebound leg.  

Disclaimer: CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.

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