DBS has been in main focus since last month when it decided to raise S$4b through rights issue. Price of DBS has initially taken a hit when the rights announcement was made when investors afraid of dilution however DBS stock price proved otherwise and reversed the trend and remained 0ne of the best performer among the local bank stocks recently. Technically, DBS appears to be heading for another rally since retracting from an intra-day high of $10.38 on 7th Jan 09 to intra-day low of $8.00 on 13th Jan 09. Stochastic signal showed that it is doing a bottoming process around the 20% level and with RSI moving up and staying above 50% level, the downside is well absorbed at the $8.00 level. DI pair is fractionally positively spaced which further suggest downside is limited for the time being. If Stochastic signal starts to cut up and ADX signal begins to move up towards 40 level, potentially DBS could be testing the $9.50 resistance level. Note at $9.50 price level, this is equivalent to $12.21 before taking into account of the rights issue. This $12.21 is pretty much a fair value for DBS at the moment. With reference to 16th Jan 09 close price of $8.48, upside of $9.50 and downside of $8.00, the reward/risk ratio is
($9.50 - $8.48) / ($8.48 - $8.00)
= 2.125x
Note, if the $8.00 support is broken, potentially it will move down towards $7.60 level.
