Why UOB Could Be the Best Bargain in the Market Right Now

Recent market turbulence has pulled the stock back to crucial support levels. Could this dip be a chance to invest?

Since April 2024, UOB (United Overseas Bank) has demonstrated significant strength by breaking past a two-year resistance level at $29.00, marking the start of a firm uptrend. However, recent market turbulence has brought the stock back to key support levels, presenting a potential buying opportunity.

This article explores the technical setup of UOB, analyzing the recent price movements and the potential for a rebound towards $32.00 and $33.50.

Additionally, it highlights how structured warrants, particularly Macquarie’s newly listed UOB MB eCW250328 (UCZW), can be utilized to amplify returns on this potential upside.

Through the Warrant Calculator tool, we examine the impact of time decay and identify the optimal holding period to maximize geared returns.

Since April 2024, UOB has turned heads by breaking past a formidable resistance level it struggled with for over two years.

This surge marks a significant shift, but recent market turbulence has pulled the stock back to crucial support levels.

Could this dip be a chance to invest in UOB shares?

UOB has been one of the strong Singapore stocks in my watchlist since April 2024 where it has turned into a firm uptrend.

To recap, since early 2022, we have been trading below this key 29.00 resistance level.

That is where we have seen profit taking multiple times and a retracement in prices as highlighted in the chart when we neared or touched this level

Hence, it was pretty much moving sideways below this resistance for 2 years before the bullish move came in April 2024.

It broke the 29.00 resistance finally, with signs of trend indicators turning up as well, with the 100-day moving average red line above the 200-day moving average blue line.

It then rallied to 33.50 in 3 months when some selling was seen as the market started to take a breather.

Over the past week, we have seen heavy selling as global markets also took a beating with funds pulling out of the mega cap technology stocks.

Aside from weaker than expected economic date reported, there is also an escalation of tensions in the Middle East with the death one of Hamas top leaders.

In the last few days, UOB has thus broken back down below some higher supports that were found like the 32.00 and 31.00.

There are also signs of the short-term trend turning down with the 20-day moving average line sloping down and prices below it.

29.00 as mentioned above, would be a very critical resistance turned support level now and that is where we can expect some good bargain hunting.

Hence, any short-term weakness can be seen as an opportunity as we pull back to previous support levels.

For example, it can be where the longer-term moving averages are with the longer-term trend still up for now.

As long as 29.00 – 30.00 is a support for UOB, a potential rebound towards 32.00 and 33.50 seems likely when the short-term trend eventually reverses back up.

Entries can be taken near or between 29.00 – 30.00 when you spot any bullish reversal candles there, with a stop loss below 29.00 just to protect the downside risk.

So, how does one take a position in UOB whereby you are able to reap more return on any rebound?

Well, one can buy the UOB structured warrant listed on the SGX to profit from more upside.

It allows you to multiply your returns with a smaller amount of capital.

As I am bullish on UOB, I will pick a call warrant since it moves in line with the underlying. I would zoom into Macquarie’s newly listed call warrant UOB MB eCW250328 (UCZW) as it has the tightest spreads and highest liquidity amongst all UOB call warrants, as seen by the logos on the Warrant Search section.

To see how this UOB call warrant will perform based on my views, I could use the Warrant Calculator tool to estimate the price performance, as well as to find out its holding costs.

Keeping the target entry unchanged at $29.32 (based on the current price of UOB shares today) on the left column, as I view this as a suitable price entry, I can see at the bottom simulated results that this translates to a projected warrant ENTRY price of $0.058. To see what the projected warrant price will be based on my target EXIT price, I will move the slider on the right column to my target profit taking level of $32, which is +9.1% higher from my entry price. Again under the bottom simulated results, this now shows a projected warrant price of $0.096 (+65.5%) However, this assumes that UOB shares move 9.1% higher today.

I will need to move the “Date” slider on the right column to a later date to observe warrant price changes due to the time decay which kicks in when I hold onto the warrant for days/weeks/months. For example, when I shift the “Date” to 13 September next month, the warrant price is now up +56.9% to $0.091, less than the previous +65.5% increase. This is because, the warrant will decay 5 ticks, or $0.005 over the next 31 days. However, the gearing effect of the warrant ensures that the warrant’s geared returns will more than offset the time decay to still generate more than 6 times the return of UOB shares.

I will continue to move the “Date” slider to the furthest date until the warrant stop producing geared returns relative to UOB shares. In this case, the Warrant Calculator for UCZW shows that the warrant will only gain 10.3% to $0.064 on 31 December 2024, which is only slightly more than UOB’s +9.1% gain. So the maximum time I should be holding onto this warrant is for 4.5 months from today.

The sharing on how one can take a position using warrants has been contributed by Macquarie warrants who is the issuer of these warrants listed on SGX.

About the Author - Joey Choy

Joey is Singapore’s renowned mentor on how to make an income by trading the stock market, an author and one of the most-watched, quoted and followed stock trading trainers in Singapore. Over the years, he has conducted numerous full house seminars, enriching thousands to trade more profitably. 

Joey’s come back story from a S$740k debt has been featured in the Business Times and inspired thousands in Singapore. In less than 3 years, he is highly regarded as one of the Top Tier Remisiers (Stock Brokers) and Traders, bagging numerous yearly awards like Top Trading Representative and Top CFD Achiever every year from 2014 to 2023 in Phillip Securities.

More about Joey here

Hope you have found the above content useful 😃 

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Look forward to see you on the inside!

- Joey

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