Straits Times Index at crucial resistance level

Straits Times Index at crucial resistance level
Straits Times Index at crucial resistance level

Straits Times Index went against the possibility of heading lower last week as economic uncertainty starts to ease. French election had started last week. Worries of France leaving Euro zone eased as early polls were towards Emmanuel Macron who is pro-EU. The initial state of the week was seen shaky but bargain hunters were seen to be holding the market well at around 3140 level before it started to rise higher. Economic estimates turn out to be favour despite many expectations of bad figures. This caused the market to react positively and hence, pushing towards its recent high of 3188 level. However, there is still cautiousness in the air despite the bullish movement.

With such bullish movement last week, many are asking whether it will be sustainable. Uncertainties in the market are definitely present but will the bull prevail?

Trend: Uptrend, 20 wma up, MacD above 0 level.

Support: 3100 (20 & 200 week MA), 3010, 2960

 Resistance: 3170, 3240, 3350

Observations:

Candlestick – White candle with long lower shadow

Histogram – Many Rs. Possible bearish crossover

RSI – At 74.3%. Overbought.

Stochastic – At 63.4%. No bullish crossover formed yet.

Bollinger Band –Closer to mid line. Band squeezing but start to expand a little.

Conclusion:

Straits Times Index refused to test its sideways support at 3100 level and instead, it headed for its sideways resistance at around 3170 level. This move have surprised me as I am expecting further selling pressure to occur based on the previous week’s chart reading. With this movement, it switch my perspective on the market direction from a sideways consolidation movement to a possible uptrend formation currently. However, this shift in perspective is just a mere guess based on the past experiences of strong bullish underlying. Therefore, it is important to confirm with other readings before I jump into conclusion.

 

The mid-term indicators clearly on the bullish side currently as the bearish movements from the past few weeks did not trigger a clearer bearish signal. MacD crossover failed to confirm and hence, this shows that the bullish underlying is strong. RSI entered into overbought region again and this indicates that STI might start gaining bullish strength again. Shorter-term indicators are still on the bearish side despite the bullish closing last week. There isn’t any indication of bullishness currently and hence, this does not affirms bullish movement to happen in this coming week.

 

With conflicting indication from the indicators, it is hard to determine how the market will move this week. With my shift in perspective, I will explore the bullish possibilities first. STI has been facing a strong resistance at around 3170 level for the past months. Last week, it managed to break slightly and this might indicate STI’s attempt to continue its uptrend movement. However, it has yet to break its recent high of 3188 level. 3188 level will be the defining level to help us to determine whether STI will be heading towards its next resistance level of 3240 level. Hitting 3240 level will be likely as breaking the strong resistance level of 3170 proves the strength of the bullishness.

 

However, shorter-term indicators are currently showing bearish readings which might prevent STI from going higher this week. If STI fails to sustain above 3170 level, it will mean that the bearish sentiment is still in control. Therefore, if STI starts to trade lower and head towards 3100 level again, my perspective shift towards the bullish side might be wrong. Sideways movements will happen again and hence, STI will revert back to its range between 3100 – 3170 levels.

 

In conclusion, the Straits Times Index is now in a crucial week. Recent high of 3188 level will be the deciding level to conclude whether STI will be continuing its uptrend movements. Breaking above this level will allow STI to head towards its next resistance at 3240 level. Expectations of a bearish retracement will not occur by then. If this did not happen, STI will then revert back to its sideways movement between 3100 – 3170 levels before it can attempt to show its direction again.

 

What to watch out for this week:

1)      Breaking of 2188 recent high.

2)      Testing of 3240 resistance level.

3)      Testing of 3100 support level.

4)       

 Trading strategy to adapt right now:

-          Long traders might want to adopt bullish breakout strategies.

-          Shortists may need to exit their short positions if breakout happens.

 

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