Starhub - Which Way Will It Go?

Starhub has been stubbornly clinging on to its downtrend for more than two months now. Closing three in fact. Twice I blogged about a breakout in the making and twice it didn't materialize. Good news didn't seem to matter to the public who were already set in their negative sentiment (see Starhub: Breakout in the Making?). Even the 100 day moving average support, which I had hope in to hold the fort, so to speak, fell apart (see Starhub: Opportunity to Buy In May Be Near at Hand) resulting in prices crumbling quickly thereafter. 

To make matters worst, candlesticks in the last three days show strong pressure from above determined to push prices down further, with 2 gravestone dojis forming in succession, one longer than the other. However, prices were unable to penetrate $2.53 for the two consecutive days before that perhaps forming a floor beneath. In fact if we look back at the charts, we would see that $2.53 did provide some support in October last year.

Also, prices, at the moment, seem resilient and intent on holding firm. However we didn't see a lot of buyers a day after that long ugly black candle day back in Dec, so I'm not so sure about the reliability of the support despite driving prices back up. 

And since all looks quite ill, now I'm just toying with this idea, but doesn't that formation remind you of a heads and shoulder, albeit lopsided? Or would this just be a manifestation of seeing what wants to see to fit the scenario, in this case negativity?

Well if that's the case, we should worry if prices break the neckline at where the current support lies. If that happens, we could see prices plummet to $2.48 or even to its 200dma. Just something to take note of.

But that said, prices seem to be withstanding the hammer blows from above for now and as such a triangle may form and it could be really soon before prices breakout from its downtrend and head upwards especially since price lows are higher and since the triangle really has not much space to run anymore. This seems the more likely of the two formations. Plus when you have to force a formation into the chart, like I did with the heads and shoulders, it usually is wrong. So my opinion is that things could head this direction rather than the other. But I could be mistaken yet again for the third time and strike out.

With a dividend yield of 7.4% and p/e of 13.65, Starhub could be quite attractive as an income stock. However as mentioned before, maintaining its current dividend is something that has analysts concerned.

Perhaps this is a view shared by many and is the reason why share price seems intent on falling lower - to make up for the coming "falling dividend" yet maintaining the yield? The warning bells are chiming. Or are they? 

Senior Guru blogger Drizzt has done a terrific job at analyzing the telcos. You can read more at his blog, Investment Moats on Starhub's yield maintenance (see here), its debt (see here) as well as on how prices adjust due to people determine to upkeep their yield (see here). I guess his blog was voted the Top Stock Market Blog in 2010 for good reason. =)

On other news, Starhub has teamed up in a venture with Japan's Nippon Telegraph and Telephone Corp to jointly build and operate submarine cables that will connect East Asia's business hubs. (You can read the news here.) Though revenues are expected to rise, we can all expect costs will as well. Will this venture increase their free cash flows that will allow Starhub to maintain its dividends yet still leave ample capital to grow is a question I can't answer. Earnings announcement on the 11th of Feb by the way. Stay tune!

Cheers,

~K

P.S. What started out as a quick post turned out to get dragged as I realized there was more news to consolidate. Apologies and thanks for reading to the end. Vested interest btw.

Starhub: Opportunity to Buy In May Be Near at Hand

In my last post on Starhub, (refer to Starhub Breakout in the Making?), I mentioned then that the opportunity to buy into the stock may have arrived but a dip to $2.63 may find it back in the downtrend channel. Prices did drop back and no confirmation of a breakout resulted, with prices dipping even lower currently to $2.57. 

That said, I also noted that the 100 day moving average has been providing strong support allowing prices to bounce up on the 21st of Dec to attempt breaking out of its downtrending channel. This didn't occur unfortunately. However, if we look at the chart, the opportunity may be close by. 

The 100dma has met the upper regions of the downtrend and may provide that extra push to prevent price from falling further. That said, indicators don't show any evidence that prices will head higher any time soon. Volume too, is much lower than the previous selloff on the 17th of Dec that resulted in the ugly black candle hinting at the probable lack of sellers. As such, we may find prices hovering around this region, bouncing from its 100dma support to its resistance at $2.65 before attempting a breakout. In other words, a triangle may result. 

As an income stock, with a dividend yield of 7.4% and a p/e of 13.8, Starhub is rather attractive as compared to its peers. However, maintaining its 20 cent/share dividend remains something of a concern to analysts.

Vested,

~K

Starhub Breakout in the Making?

Since my last post on Starhub (see Two Extremes: Starhub - Falling Star, Singpost - Blasting Off! for discussion), thankfully, what could have been the start of a steeper downtrend didn't materialize and prices bounced back to into its channel. The weekly chart below provides a clearer picture.

As seen above, Starhub has reached the upper regions of the channel and may well be poised to break out. In the daily chart below, we see the breakout occuring yesterday with price closing higher than the channel lines.

With the MACD giving a buy signal and turning up, a double bottoming of the RSI on the 17th and 22nd of Dec which is now rising, together with the OBV and Stochastics, it may jolly well be the opportunity to enter this stock. However, as ADX doesn't show a strong trend and with MFI yet to turn up, if this is nothing more than a rebound, a drop back to $2.63 may see the price back in the channel with the 100 day moving average providing support. Only time will tell.

That said, the announcement this morning in Today papers of Starhub's multi-year, multi-million dollar deal sealed to service Marina Bay Sands, may be the catalyst for stock prices to rise.

Cheers,

~K

Two Extremes: Starhub - Falling Star, Singpost - Blasting Off!

Extreme hopes are born of extreme misery.
~ Bertrand Russell

Despite no official announcement or news release, at least not that I could find, today saw extreme opposing movements for two stocks I'm vested in. Starhub, our second largest mobile service provider, fell drastically, while Singpost rocketed upwards.

It seems that the bulls have decided to finally turn up at Singpost leaving Starhub at the mercy of the bears.

For days now, it seemed that both Starhub and Singpost were downtrending and that there were expectations for them to go even lower (Refer to Singpost Rebounding Strong, Singpost - Downtrend to Continue?, and ASSI's Starhub, CapitaMalls Asia and CitySpring for previous discussions).

To get a more recent picture, lets turn to our charts.

Starhub

We can see clearly that Starhub is downtrending. Its two previous support of $2.60 and $2.53 which I was hoping for them to hold have been smashed through. Today's long black candle as well as the negative sentiments of all the indicators doesn't bode well for Starhub. Worse yet, ADX looks like the trend is starting to strengthen. To top this off, it has even broke through it's downtrend channel to form what looks like the beginning of an even steeper fall. Not good. Not good at all. I expect to see more selling come Monday. Next support is at $2.48 and then at $2.41 which happens to also be the 200 day moving average. It is possible that prices will hit the 200dma seeing that the correction has sent a couple of other stocks down to its 200dma, Singpost included.

Personally, I'm not selling my stake as I bought into Starhub to add to my income portfolio (not for capital gains). Also, I entered at the last correction of a price of $2.23. Plus I've collected two dividends which brings my price down to $2.13 so I think I'm pretty safe for now at least. Will be keeping an eye out for any new negative developments that may cause me to rethink holding on to this. 

However those looking to buy into Starhub for dividends, can use this selloff as a chance to get vested into a stock with a relatively high yield. Not just yet though. A word of caution, please wait for evidence of a rebound or stabilization in price before doing so. Catching a falling knife is no fun, no fun at all.

Singpost

Anyone who had followed the charts on the previous days following the start of the correction would have noticed that the prices bounced off the 200dma twice, one at $1.12 and at $1.13, forming a double bottom indicating that there was demand for the stock and likely to push prices back up. Today was that day. 

Singpost broke out of its downtrend today with an amazing leap upwards, crashing through two resistance at $1.19 and $1.20, heading straight to test the next resistance at $1.23 where it closed today. With today's high buying volume and all indicators favouring price heading higher, it most likely will break above this to test the last major resistance at $1.24. 

To anyone who bought the stock at the support prices or for the last couple of days before today's blast off, well done!

Cheers,

~K