Strait Times Index sitting on the fence

Strait Times Index sitting on the fence
Strait Times Index sitting on the fence

Straits Times Index ended first quarter of the year with a bullish closing. Market participants decided to pick themselves up after the fall that was triggered by concerns of Trump’s lacking of power to implement the policies that he had promised. In the early week, STI managed to rebound from the low of 3112 level and head towards its resistance at around 3170 level. By the mid of the week, it managed to breach the level and sustain above this resistance level. Closing at 3175.11 level, STI gained a total of 32.21 points for the week. And as for the whole month of March, a total of 78.5pts was gained. These gains are mainly contributed by the positive sentiment of US president Trump’s fight for economic policies that he had promised.

Many are still wondering whether to chase the market or wait for a correction to happen before entering the market. So what will be the best strategy to implement currently?

Let’s look at STI’s chart.

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

Support: 3100, (200 week MA), 3010, 2960 (20, 100 week MA)

 Resistance: 3170, 3240, 3350

Observations:

Candlestick – Long white candle

Histogram – Multiple Rs. No bearish crossover yet.

RSI – At 85.3%. Overbought. Spike up suddenly.

Stochastic – At 80.3%. Back to overbought. Possible Bullish crossover again.

Bollinger Band – Closer to upper band. Band expanding.

Conclusion:

Last week’s action did not conform to the possibility of bearishness. Instead, STI choose to ignore the bearish reversal candle and regain all the losses that were made in the previous week. Furthermore, a new high was formed and this further justify that STI is refusing to start a correctional movement. These movements have thrown many chartists like me into a state of confusion. Somehow, a sense of familiarity of such scenario has been felt by me when this situation happens. Emotions and “feeling” aside, we should gain our clarity from the technical aspect from the chart itself.

 

The mid-term indicators continue to sustain its bullish momentum despite risk of losing it after previous week’s movement. Overbought situation continues after last week’s movement. What surprises me is the sudden spike of RSI in the overbought zone. This is something which I find it rarely happened. Shorter-term indicators are showing mixed readings currently. Histogram continues to show bearishness despite strong bullish closing last week. Stochastic reacted slightly which bring upon a possible bullish crossover. The technical indicators readings are indeed confusing right now and it is hard to draw a clear certainty of what the direction that market will be heading.

 

Precedence should be given to the mid-term indicator. Hence, we should make some fair expectations on the bullish side currently. Since STI is able to break 3170 resistance level last week, it is fair to assume that this breakout is sustainable and will likely to lead STI towards its next resistance level. The next resistance level stands at 3240 level which there will be some room for STI to reach out. Thus, when the bullish momentum continues this week, STI will then be ignoring the current overbought condition and continue to head higher.

 

On the other hand, the pessimistic situation will be when STI fails to hold above its resistance of 3170 level. If this happens, it will mean that the resistance level is firm and the breakout is false. When false breakout happens, bearish movements will start to creep it. This bearish movement will then encourage STI to reach for its support level at 3100 level again. This bearish movement will definitely help to ease of the overbought condition that STI is facing currently.

 

In conclusion, the Straits Times Index is currently sitting on the fence. There will be some whom is confident that STI can go higher after breaking its resistance at 3170 level. This breakout can help STI to reach towards its next resistance at 3240 level. However, this bullishness can be assured if STI is able to hold above 3170 level this week. If it fails to do so, bearishness will creep in again which can lead STI to test its support at 3100 level again. Therefore, prudent and cautious decisions are to be made in current situations.

 

What to watch out for this week:

1)      Testing of 3240 resistance level

2)      Breaking of 3170 support level

3)      Testing of 3100 support level

 

 Trading strategy to adapt right now:

-        Long traders should exercise a level of caution.

-        Shortists should also exercise a level of caution.

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*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.

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