SI Technical Analysis: 60 Percent Since Our Coverage! What Next?

Just around the start of July, SI Research wrote an article titled “Hi-P International – Capitalising On A Global Tech Boom”.

Back then, shares of Hi-P International (Hi-P) was undergoing a minor correction when we took the opportunity to highlight the company’s strengthening fundamentals and investment merits. Spurred by its spectacular 1H17 results, the company’s shares rallied from $0.91 to a multi-year high of $1.50 per share by 14 August, which translated to an upside of more than 60 percent.

Including the recent gains, shares of Hi-P has garnered a 194.1 percent since the beginning of the year to $1.50 per share, making it the hottest local stock for 2017. That said, with 1H17 results season coming to an end, news flow could dry up as the global market shifts attention to the upcoming Federal Reserve’s annual Jackson Hole symposium and the US debt ceiling showdown.

What Next?

Leading up to the big events, markets should see some form of profit-taking as traders reduce their positions to lower their exposure ahead of the period of heightened volatility. Investors are expecting no Fed bombshells and hoping that the Fed remains dovish in their statements during the symposium. Meanwhile, while a US-default is highly likely, a prolonged showdown in the White House to raise the country’s debt ceiling could also create near-term pressures on global stock prices.

For stocks like Hi-P that have experienced a meteoric rise in a short period of time, the upcoming jitters could potentially send the stock into a major correction. As seen from Hi-P’s chart, the share price has lost some gains to $1.40 as on 21 August and we believe the key resistance of $1.50 will not be breached in the coming weeks. As such, taking the jump now may not be ideal as the risk-to-reward would not be attractive.

Wait For Opportunities

Kudos to those who bought Hi-P early! We hope some investors have heeded our call and made money on this counter too. But for those who did not, do not let the “fear of missing out” turn you risk-blind.

Although the current share price of Hi-P has shed some gains, Hi-P is still trading above the Relative Strength Index (RSI) of 70, reflecting that Hi-P shares are still in overbought territory. Candlesticks have also formed a bearish confirmation suggesting that the shares may go into correction or at least be pressured as traders take profit. The moving averages (MA) – a lagging technical indicator – will likely start converging and a crossover of the 20-day MA and 50-day MA would signal further technical weakness.

Taking the entire trading range from June to August, Hi-P traded from a low of $0.845 to a high of $1.50. The stock may test its nearest support level at about $1.35, which is near its Fibonacci Retracement level of 23.6 percent. Further support based on 38.2 percent Fibonacci Retracement and 50 percent retracement could be found at $1.25 and $1.18. At $1.18, this level is also near the previous resistance-turned-support at $1.08. This is where investors may find opportunities to accumulate, which is in the region of the “Golden Ratio”, between Fibonacci Retracement level of 50 percent and 61.8 percent.

That said, share price seems to be consolidating and supported above last Friday’s low of $1.385. If this level holds for the coming weeks, the share may seek to retest its $1.50-key resistance level.

Hi-P Chart

Hi-P chart