Straits Times Index will still face bearish pressure despite bullish closing last week

Straits Times Index will still face bearish pressure despite bullish closing last week
Straits Times Index will still face bearish pressure despite bullish closing last week

Straits Times Index started to gain some bullish traction last week after lacking of clear direction last week. The start of the week did not start with a bullish start. Instead, selling pressure was seen to push STI to as low as 3195 level. Upon this level, bargain hunters were seen entering the market to start pushing offshore marines sector higher. This helped STI to start its buying momentum. This time round, the buying momentum did not face selling pressure until the end of the week. Therefore, STI was able to maintain reverse its losses and retain the gains with 20.59pts up for the week. Ending off at 3240 level.

As STI is still in uptrend momentum, this rebound can be a turning point to help STI to continue its bullish movements. However, some were doubtful about it. So who will be right?

Let’s find the answers from the chart.

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

Support: 3180, 3100 (20 & 200 week MA), 2960 (50 week MA)

Resistance: 3270, 3350, 3450

Observations:

Candlestick – Short white candle with lower shadow.

Histogram – 3 Rs. Possible bearish crossover. Possible bearish divergence.

RSI – At 68.8%. Slightly below overbought.

Stochastic – At 62.3%. Out of overbought.

Bollinger Band – Close to upper band. Band contracting.

Conclusion:

Key support at 3180 level seems to be holding well after last week’s movement. White candle closing had triggered a possible bullish reversal pattern which confirms the support level at 3180. As 3180 support has yet to be clearly tested, it is also important to make sure the bullish reversal pattern is not a false pattern. Therefore, we have to get further assurance from the indicators and also further candle patterns before we can be assured that the bullish momentum can continue.

 

The mid-term indicators stayed on the bullish side last week. Bearish divergence signal continued to form while the possibility of bearish crossover in MacD is still high. Hence, STI is not out of the risk of switching to bearish underlying after last week’s bullish movement. Shorter-term indicators, surprisingly, are still trading on the bearish side this week. Both Histogram and Stochastic had not reacted to the bullish closing last Friday; due to the lagging factor. Further bullish movements are needed to push the shorter-term indicators on the bullish side. Otherwise, bearish momentum will likely to continue.

 

From the indicators, it seems that there are some underlying tussles currently. Key support level at 3180 is still holding well but the bearish momentum seems to be to intact. Therefore, it is still early to rule that the bearish momentum had ended and have switched to the bullish. Instead, cautiousness is still important as the market still runs a risk on downside movement. Failure to hold above 3180 level can bring further bearish momentum in the market that can bring STI to the next support level at 3100 or a much lower level at 2960.

 

What can reverse the current bearish momentum is the confirmation of the bullish reversal pattern. If STI is able to trade higher this week, it will mean that the bullish reversal pattern is being confirmed. This will mean that STI has to trade higher than 3248 level before assurance can come in. Once STI is able to go beyond this level, STI will then approach its resistance at 3270 level again to test it. Attempts to break this resistance level are likely to happen but for now, it is hard to see if this resistance level will be able to break.

 

In conclusion, despite the bullish movements last week, STI is still running the risk of bearish movements. Key support level at 3180 holds well but it is hard to predict whether it will hold well despite a bullish candle closing last week. Further confirmation of the bullish reversal is needed in order to stop the bearish momentum. In order to do that, STI must end the week higher than 3248 level. However, this will also mean that it will be trading close to 3270 resistance level. Failure to hold key support at 3180 level will certainly trigger further bearish pressure towards its support at 3100. Therefore, do expect the tussle of bulls and bears between 3180 – 3270 levels this week.

 

What to watch out for this week:

1)      Testing of 3180 support level.

2)      Breaking of 3180 support level.

3)      Testing of 3100 support level.

4)      Testing of 3270 resistance level.

 

 Trading strategy to adapt right now:

-        Long traders to stay cautious.

-        Shortists to watch the outcome of bearish movement.

This market analysis is part of the premium services that is provided to Jay Chia’s clients. If you would like to find out on what other premium services Jay Chia provides, please visit www.Jay-Chia.com. You can also contact Jay Chia through the website.

Like Jay Chia’s Facebook page to receive more market opinions now!
https://www.facebook.com/JayChia.Mentor/

 

*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.