From February 25 to March 4, the Straits Times Index (STI) saw an increase of over 200 points. The STI closed at 2,837 points on March 4, Friday, which is a considerably good performance. The STI then slightly declined to 2,823.51 points.
Local stock-market analyst Gabriel Gan highlighted that it is normal for a decline of the index to take place after a strong rebound. He sees this as a necessary “rest” in order to embark on a “longer journey”. Given the largely stable fundamentals, Gabriel opined that after some slight adjustments, the stock market will have the capacity to move up.
STI’s Support Level
Gabriel had earlier on predicted that the STI would rise to the levels between 2,750 to 2,780 points. Since STI surged beyond 2,800 points last week, Gabriel’s take is that if the STI adjusts, the first support level should be at 2,780 points. Below are two strategies that investors can adopt to “catch the rebound”.
1. Pay Attention to Trend of Crude Oil Prices
Investors should pay attention to the trend of crude oil prices, advised Gabriel – previously, due to a sharp decline in oil prices, the stock markets have recorded corresponding declines, too. But now, as oil prices are reporting a rally, oil and gas stocks would be expecting a boost.
Gabriel also pointed out that oil-related issues are political in nature. Previously, Saudi Arabia and Russia have agreed to freeze oil production. However, it remains to be seen if the other oil producing countries would agree to maintain the current level of production, i.e. not increasing it further. Of course, for the oil prices to gain better recovery, a reduction in production would be a more effective solution.
And hence, if more good news comes up along the way, oil prices might rally further. Following that, oil and gas stocks such as Ezra Holdings and Ezion Holdings are the would-be gainers.
2. Make Entry Amidst Market Adjustment
Gabriel noticed that many retail investors have missed the upward trend during the recent rally. An overwhelming amount of negative news and unfavourable factors make investors not confident enough to enter the market.
He suggests that investors can make the move when the stock market is showing signs of adjustment, and blue-chip stocks are particularly worthwhile. A good example is DBS, which increased fairly remarkably – from $13 to around $15. This is perhaps a good time for small-scale investors to grab the opportunity.