Straits Times Index hit by Banks Downgrade by Moody | Jay Chia - Your Financial Mentor

Straits Times Index hit by Banks Downgrade by Moody

Straits Times Index hit by Banks Downgrade by Moody
Straits Times Index hit by Banks Downgrade by Moody

Profit taking continues to be seen in the market last week. Market participants are lacking of confidence to hold on to their positions are many are anticipating further bad news. There was a strong rebound during the mid of the week but it failed to sustain. Moody had downgraded the banks of Singapore to negative rating. This caused the bank stocks to face downward pressure after the report. Support level at 2815 level was tested twice during the week and it managed to hold well. In the current sentiment, it will be hard for market participants to find reasons to buy. Hence, STI closed at 2818.49 level with 28.9pts down.

With further bearish sentiment setting in, will STI continue the bearishness this week? Or will it attempt to rebound again?

Let’s evaluate STI’s chart to find out the chances.

Trend: Possibility of switching to uptrend, 20 wma turning flat, MacD below 0 level.

Support: 2815 , 2740 (20 week MA), 2680

 Resistance: 2900, 2950, 3020 (50 Week MA)

Observations:

Candlestick – Black Candle.

Histogram – Bearish signal. MacD closing to 0 line

RSI – At 46.8%. Facing RSI resistance.

Stochastic – At 82.8%. Overbought. Bearish crossover seen.

Bollinger Band –Close to mid band. Band squeezing.

Conclusion:

STI had confirmed its resistance level at 2900 level after confirming the bearish reversal pattern. This indicates that STI will probably face further bearish pressure in this coming week. 2815 support level was being tested and this cannot indicate that STI will be rebounding from this support level. Further studies are needed to determine whether STI will be holding at this support level this week. The indicators should be able to give a much clearer indication.

 

Mid-term indicators are still showing signs of reversal despite the bearish closing last week. RSI resistance is still holding strongly and this indicates that STI might continue to face further downward pressure. Shorter-term indicators are clearly showing bearish signals which will likely to push STI down further. Therefore, it is clear that STI will likely to continue to face bearish pressure this week before it can attempt a rebound.

 

Thus, STI will likely to attempt to break its support at 2815 level this week. Once this support level is broken, it will then be heading towards its next support level at 2740 level. 2740 support level will likely to be a stronger support level as it confluences with the 20 weekly MA line. Hence, it is more likely that STI will be able to form a higher low formation at this support level. However, even if this support level fails to hold, the next support level at 2670 level will unlikely to break so easily too.

 

Possibilities of a trend reversal in STI are still very likely to happen right now despite the bearish movements for the past 2 weeks. What STI is lacking right now is a higher low formation. Once higher low formation is formed, STI will then be able to attempt to test the resistance at 2900 level again. Breaking 2900 resistance level will mean that the uptrend formation is confirmed and thus, STI will be continuing its uptrend movement.

 

In conclusion, the Straits Times Index will face further bearish pressure this week. 2815 support level will likely to be broken this week so as that STI will be able to find a firmer foothold at 2740 support level. 2740 support level is proved to be the best level for STI to form its higher low formation. Once higher low formation is formed, STI will then be able to start its uptrend formation and resistance at 2900 level will be tested again.

 

What to watch out for this week:

1)      Testing of 2815 support level

2)      Breaking of 2815 support level

3)      Testing of 2740 support level

4)      Testing of 2900 resistance level

 Trading strategy to adapt right now:

-          Long traders should consider to buy when there is bullish reversal at support level

-          Shortists should stay cautious

 

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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.

Please consult your respective advisers.