Straits Times Index hovering at 3100 level for now

Straits Times Index hovering at 3100 level for now
Straits Times Index hovering at 3100 level for now

Straits Times Index attempted to reach for a higher level this week but it faced profit taking pressure during the week. The week started off weak with brought over selling pressure from the previous week. This allowed STI to test its support at 3100 level again. This support level broke briefly on Tuesday but support at 20ma weekly line was firm. Hence, a rebound was formed and this helped STI to reach its resistance at 3160 level. Testing 3160 resistance level turns out to be a brief moment also as sellers was eager to exit the market. Hence, volatility spiked and caused STI to end the week flat. For the week, 5.31pts was gained. Closing at 3122.34 level.

One of the main topics that were discussed over the week is the US Fed interest rate hike. Many are confident that the interest rate will be increased during the mid of March As the days are approaching, how will STI react to it?

Let’s evaluate STI’s momentum currently.

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

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

 Resistance: 3160, 3240, 3350

Observations:

Candlestick – White candle with long upper shadow.

Histogram – 2 Rs. No bearish crossover yet.

RSI – At 75.9%. Overbought.

Stochastic – At 82.3%. Overbought. Bearish crossover triggered.

Bollinger Band – Close to upper band. Band expanding.

Conclusion:

Straits Times Index managed to hold its support at 3100 level and even approached to test the resistance at 3160 level. This shows that the break out of 3100 level is sustainable. However, the upper shadow that was formed by the candle last week has also shown that the resistance at 3160 level is holding firmly. Observation of the past few weeks’ candle has also indicated that the bullish momentum strength is starting to weaken over the weeks. But this cannot be the main justification to determine that the market will be coming for a retracement action.

 

The mid-term indicators continued to be on the bullish side after last week’s bullish closing. Overbought condition continues to persist. RSI seems to be losing its momentum and might be starting to come off from its overbought condition. Shorter-term indicators are now on the bearish side despite bullish closing last week. This might encourage STI to seek for further bearish movement which might lead to further downside pressure.

 

With bearish pressure likely to persist, STI might not be able to attempt to reach its resistance level at 3160 level this week. Therefore, STI might continue to approach 3100 resistance turn support level to test it. 3100 level might continue to attempt to hold the support level this week. However, if it breaks this support level this week, it will mean that the retracement actions will likely to happen. The next immediate support level for STI will be at 3010 level. This support level will be the target level for STI to reach out once 3100 support level fails to hold.

 

However, the underlying bullish momentum is still intact currently. Hence, it is still possible for STI to attempt to reach its resistance level at 3160 level during this week. As long as STI is able to stay above 3100 level this week, STI will still be able to reach out for its resistance at 3160 level this week. Testing this resistance level will not indicate a strong possibility of breaking this resistance level. With extended overbought condition in STI, it is more likely that the resistance level will hold firmly.

 

In conclusion, the Straits Times Index continues to trade at a key level of 3100 level. Consolidative actions will likely to happen at this support level for this week. But if it fails to hold at this support level, selling pressure will start to set in and cause STI to seek for its next support level at 3010 level. If it managed to hold at this support level, STI will then be able to attempt to test its resistance at 3160 level again. Going beyond 3160 resistance level is very unlikely to happen for this week.

 

What to watch out for this week:

1)      Testing of 3100 support level

2)      Breaking of 3100 support level

3)      Testing of 3010 support level

4)      Testing of 3160 resistance level

 

 Trading strategy to adapt right now:

-        Long traders should take partial profits at resistance level.

-        Shortists whom can take risk can start watching out for retracement actions.

 

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