Sembcorp Industries Ltd (SCI SP)
Recommendation: Technical Buy
Target Prices: S$5.15, S$5.70, S$6.10, S$6.60
Stop Loss: S$4.18
Date of Recommendation: 2nd September 2024
Broker: CGS-CIMB Securities
Investment Thesis: Sembcorp Industries – Successful Rebound with Strong Technical Indicators
Sembcorp Industries Ltd has shown a successful rebound from recent lows, signaling a continuation of its upward trend. The stock has recently completed an inverted head and shoulder formation, breaking above the key resistance level of S$4.88, which sets the stage for further gains.
- Inverted Head and Shoulder Formation: This classic reversal pattern indicates that the stock has bottomed out and is now on an upward trajectory. The breakout above the S$4.88 resistance level confirms this bullish outlook.
- Technical Breakout: Sembcorp has also broken out of a downtrend corrective channel, further reinforcing the bullish sentiment. The strong bullish bar was supported by rising volume, indicating strong investor interest.
- Weekly Chart Analysis: The weekly chart shows the potential end of a corrective ABC wave, with the stock forming a larger flag/falling wedge pattern. This pattern increases the probability of further upside, especially with the recent bullish kumo twist in the Ichimoku cloud, which adds to the confidence in the stock’s upward potential.
- Momentum Indicators: The 23-period Rate of Change (ROC) has risen above the zero line, forming a bullish divergence. Additionally, the Stochastic Oscillator confirms the oversold crossover, while volume continues to expand healthily, all pointing towards sustained bullish momentum.
Valuation and Financials:
Sembcorp Industries is currently trading at S$4.93, with multiple target prices set at S$5.15, S$5.70, S$6.10, and S$6.60. The stock’s technical indicators suggest a strong potential for further gains, making it an attractive buy for traders looking to capitalize on its rebound.
Share Price Catalysts:
- Successful completion of the inverted head and shoulder formation, leading to further gains.
- Continued breakout above key resistance levels.
- Sustained volume and momentum indicators confirming the bullish trend.
Company Overview: Sembcorp Industries Ltd provides utilities and integrated services for industrial sites, including power, gas, steam, water, wastewater treatment, and other on-site services. The company serves industrial parks, business, commercial, and residential spaces, making it a key player in the infrastructure and utilities sector in Singapore.
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