Straits Times Index continues to consolidate.

Straits Times Index continues to consolidate.
Straits Times Index continues to consolidate.

Straits Times Index ended the month of September without much trading actions are many traders and investors seems to be staying sidelines. US interest rate and tax reforms news seems to be affecting the market. This news triggered tightly ranged swing movements in the market last week. The start of the week shows bullish attempts but it was quick to be beaten down by the bears on Tuesday. However, with confidence that US interest rate hike will more likely to occur during the end of the year, financial gains strength which pushed STI to as high as 3250 level. But coming close to the week, profit taking actions cleared all the gains achieved. Hence, STI was seen closing the week with only 0.34pts down, ending at 3219.91 level.

Indeed, STI is currently running on a consolidative mode where it cannot break out of a range between 3190 – 3245 levels. Will STI be able to gain momentum for this week?

Let’s read the chart to determine the direction.

Trend: Uptrend formation looking compromised, 20 wma flatten, MacD above 0.

Support: 3190, 3100 (50 & 200 week MA), 2960

Resistance: 3270 (20 week MA), 3355, 3450

Observations:

Candlestick – 2nd Black spinning top.

Histogram – Multiple Rs. MacD heading downwards. Bearish divergence still intact.

RSI – At 51.7%. Bearish divergence still intact. Seems to be rebounding off 50% line.

Stochastic – At 22.8%. Oversold. Possible bullish crossover.

Bollinger Band – Testing lower. Band contracting.

Conclusion:

It has been the 3rd week for STI to be able to stay above its support level. This affirms that STI is holding its support level well and what is lacking of right now is a rebound to confirm the support level. Bearish candle continued to be seen which indicates that the bears are still in the market. Therefore, it is not conclusive that this support level will hold firmly. We have to look at the indicators to find further hints on how market will react in the coming weeks.

 

The mid-term indicators continued to grow weaker after last week’s movement. However, there are positive signs from the RSI indicator. RSI maybe showing some support which can bring some bullish momentum into the market. The shorter-term indicators are still showing bearishness. Stochastic seems to be triggering a bullish crossover currently, furthermore, it is also trending in oversold position. This means that there might be a good chance of bullish rebound for this coming week.

 

With rebound likely to happen, we should look at the extent of which STI can rebound towards. Based on last week’s movement, upside seems to be capped by a resistance at 3245 level which coincides with the 20week MA line. If STI is able to go beyond this resistance level, it will mean that it is seeking the next resistance level at 3270 level. With some underlying bearishness in the market, going beyond 3270 resistance level is unlikely for now.

 

With confidence of a rebound happen, it is clear that 3190 support level will hold firmly. Hence, downside risk towards 3100 level is low currently. The next possible scenario for this week will be staying in its range bound again. STI has been struggling to go beyond 3245 resistance level for past 3 weeks. Hence, it is very likely that it will stay in the range between 3190 – 3245 levels this week. With this, volatility can be expected to happen during the week.

 

In conclusion, the Straits Times Index has good chances to trigger a rebound in this week. It will first face resistance at 3245 level which it might face issues overcoming. If STI is unable to go beyond 3245 level, it will revert back to its range bound movements between 3190 – 3245 levels. However, if STI is able to break 3245 level this week, we should be able to see STI reaching for its next resistance at 3270 level.

 

What to watch out for this week:

1)      Testing of 3245 resistance level.

2)      Testing of 3190 support level.

3)      Breaking of 3245 resistance level.

4)      Testing of 3270 resistance level.

 

 Trading strategy to adapt right now:

-        Long traders whom can take risk can consider short-term rebound trades.

-        Shortists can consider on the short side if the support fails to hold.

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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.

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