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Will Ramba start to move again?

Recently, local market dropped very fast. STI index dropped from the recent rebound high of 3356 on 12 Sept to 3221 last Friday. It suffered a sell down of 4% within 15 trading days only. The sell down for many individual stocks are much more severe. It need to take note that the support at 3220 is very important, the break down this level may become the start of a mid to long term downtrend for STI. So we need to monitor closely on the strength of this support for the next a few weeks to a few month.

A good news for the local market is STI had a very strong rebound last Friday and formed a bullish engulfing candle. This nice bullish candle pattern indicates that 3220 is a very strong support, as least for short term, and is not likely to be broken very soon. Since STI is stabilized for short term, it is a good time to look out for strong stocks that may have strong rebound or rally when STI stabilized.

Ramba is a good candidate one may look at in this market condition. It had a nice rally recently from 0.415 to 0.595, a 43% movement, within 4 trading days. The reason for this movement can be found from SGX announcement that Ramba signed a binding letter to transfer (sell) 25% working interest of its subsidy with a company call Risco Energy Investments Holding Pte(REI). Ltd. It is not a confirmed deal yet, but the price of Ramba already started to move. This price action indicates that Rama is likely to benefit a lot from the possible deal otherwise smart money will not push up the price so much. Regarding detail of the possible deal, REI may pay up to US$157.5M to Ramba according to the offer letter. As the market cap of Ramba is only S$173M, according to its financial report, Ramba may earn back more than its market cap from this deal through the selling of 25% of its work interest of its subsidy only. Undoubtedly, the price of Ramba has much more potential upside, given the deal can be go through.

From technically perspective, the pull back after the 4 day rally was much weaker than the rally itself (price can not close below 61.8% of the up move). In addition, the price managed to hold well during the sell down of STI from 30 Sept to 2 Oct, it is another sign of strength. It may start to rally again if it manage to break above the resistance at 0.51, and this breakout may provide a trading opportunity with low risk.

It is better to also look at the risk involved. As the deal may not go through eventually, the price movement recently can be just a bubble. In addition, as the stock may be overbought because of the news, it may suffer a sell down when the deal finally have a conclusion, either go though or not go through. As Ramba is very volatile recently on both side, the risk must be considered before a trading or investment decision is made. It is also very important to plan a stop loss plan before take any buy action.

STI:

Ramba:

Robin Han
Robin Han

Dr. Robin Han, a graduated from NUS with a Ph.D in Department of Chemical and Biomolecular Engineering, has been actively trading in Singapore stock market since 2007. His passion has let Dr. Robin to become a full time trader since 2010. He has extensively share his experience with his fellow investors on trading Singapore stock market using both technical analysis and fundamental analysis.

Dr. Robin is a regular guest speaker for radio 95.8 on financial program. He also has been invited by different companies and societies to conduct educational seminars on stock investments, including Shares Investment, Wealth Directions (Founder: Dennis Ng), Traders Round Table, SIM, Raffles Business International, Online trader's club and Alpha Alliance. He is also contracted by N2N (a listed trading software provider in Malaysia) as their overseas educational speaker in stocks.