STI's uptrend is confirmed. Further upside to be expected in coming weeks.

STI's uptrend is confirmed. Further upside to be expected in coming weeks.
STI's uptrend is confirmed. Further upside to be expected in coming weeks.

Last week, STI ended its half year with strong bullish showing. This was primary due to the decision made by EU to reach out the debt –laden European banks to help them with their current situations. The world market cheered on this decision by closing strongly for the week. Last Friday night, DJI alone closed 277.83pts higher. Similarly, STI experienced a strong closing on last Friday, 31.63pts higher, ending at 2878 level. Last Friday’s closing also marked a gain of 50.36pts for the week. Over the weekend, reports on EU’s decision were deemed to be a timely measure and it might have lifted up the market sentiment for this upcoming week. Will STI continue to be buoyant by this positive sentiment this week? Or will it be the time for STI to start retracing?

Let’s analysis STI’s chart to derive a conclusion.

Trend: Uptrend, 20ma poise up, MacD above 0

 

Support:  2850 (50ma & 200ma), 2800 (20ma), 2760

 

Resistance: 2880, 2910 (100ma), 2950

 

Observations:

Candlestick – Long white candle with long upper shadow.

Histogram – 3Gs. No bearish divergence yet.

RSI – Around 69%. Nearly overbought. No bearish divergence yet.

Stochastic – Around 76%. Nearly overbought. No bearish crossover seen.

Bollinger Band – Between Mid and Upper band. Band opening up.

 

Conclusion:

Last week, STI started its week by retracing towards its 20ma support line but it rebounded at 2800 level before testing the line. 2800 level is a horizontal support level for STI and the market decided to hold its support there. Its rebound at 2800 level had confirmed that STI is forming an uptrend by forming a higher low formation. With a higher high and higher low being seen, STI is likely to show a sustainable uptrend and hence, a higher high is to be expected. With last Friday’s bullish movement, the expectation of a higher high expectation is being confirmed as STI managed to break its recent high of 2861 level. Hence, STI is likely to head for a higher level to decide where the higher high will be forming.

 

The mid-term indicators had confirmed the uptrend after last week’s bullish movement. 20ma & MacD line has clearly shown that STI’s current trend is uptrend which confirms the higher high and higher low formation. RSI also showed strength as it continues to stay above 50%. These mid-term indicators have shown that STI’s current uptrend will be sustainable. The short-term indicators were indicating bullish momentum currently. Stochastic is showing that there could be further upside room for STI as it has yet to enter the overbought region. However, Stochastic is likely to be trading in the overbought region on Monday if STI managed to close bullishly. Overall, the indicators were showing bullishness and upside will likely to continue this week.

 

As STI had broken out of recent high level, STI will likely to head higher to form a higher high at its resistance level. Currently, STI’s immediate resistance level stands at 2880 level. Although STI attempted to break this resistance level last Friday, profit takers had prevented STI from closing beyond this resistance which caused STI to form a long upper shadow. However, with bullish closing from DJI and strong bullish momentum from the short-term indicators, STI is likely to break this resistance level and head for the next resistance level. The next resistance level for STI stands at 2910 level which will likely be a stronger resistance level as it confluences with 100ma. Therefore, STI will likely to test 2910 level before it will have a possibility of retracement for higher high formation.

 

If STI is quick to test its resistance level and form a higher high formation, support levels should be identified in order to identify opportunities to enter long positions. The current support level for STI stands at 2850 level where it has confluences with 50 & 200ma support line. This support level will likely be a very strong support for STI to form a higher low formation. However, if STI fails to hold at this support level, it will indicate weakness in the current uptrend and the uptrend might reverse. Another possible scenario for retracement will happen if STI managed to break this 2880 resistance level. As broken resistance levels will turn into support level, 2880 level might also be another likely support level for STI.

 

In conclusion, given that the current market sentiment is bullish, STI will likely to head higher this week. The immediate resistance of 2880 level is expected to be broken and STI will likely to head towards its next resistance of 2910 level. There is a strong possibility that higher high formation might form at this resistance level. Therefore, if STI is unable to break 2910 resistance level, one should expect STI to retrace to its support level. Possible support level for STI, if 2880 resistance is broken, will be at 2880 and 2800 level. 2800 level is deemed to be the stronger support level where long position can be considered at that level. Therefore, STI is definitely going in an uptrend and is likely to be sustainable. Retracement is to be expected when 2910 level is being tested.

 

 

What to watch out for this week:

1)      Breaking of 2880 resistance level

2)      Testing of 2910 resistance level

3)      Testing of 2850 support level

 

 

Trading strategy to adapt right now:

-          Long traders whom had taken long positions last week should start to consider taking profits this week. At least partial profit should be taken. Adding new long position is not advisable unless STI is able to retrace to its strong support level.

-          Shortists have to adopt counter-trend short strategy currently as the trend is uptrend now. Cautious short position with quick profit target can be initiated if there are bearish signs at resistance levels.

 

 

*Disclaimer:

This analysis is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to purchase or sell the product mentioned. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks.

Please consult your respective advisers.