Range bound continues in Straits Times Index

Range bound continues in Straits Times Index
Range bound continues in Straits Times Index

Range bound. The Straits Times Index continued its range bound streak last week despite various attempts to move beyond its usual movements. Talks on US Fed interest rate hikes became the topic of the week which brought some volatility into the market. The start was a bearish one but it did not go beyond 3200 level. Buyers were still supporting this level which prevented sellers from pushing the market out of the lower range. Buyers were strong last Wednesday in anticipation of good economic data in US. However, the gains were unsustainable which lead to a flat closing for the week. STI closed at 3229.01 level with 2.53pts higher.

The first week of July turns out to be similar to last month’s movements. More got wary of the market as time goes by. Is this calm before the storm?

Let’s evaluate STI’s chart now.

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

Support: 3190, 3100 (20 & 200 week MA), 2960 (50 week MA)

Resistance: 3270, 3350, 3450

Observations:

Candlestick – Doji like candle.

Histogram – Many Rs. Bearish crossover formed. Bearish divergence.

RSI – At 59.1%. Heading towards 50%.

Stochastic – At 34.2%. Heading towards oversold.

Bollinger Band – Closer to mid band. Band contract further.

Conclusion:

Last week’s movement in the market did not make much of the difference in STI’s chart. There was lacking of bullish confirmation on the previous week’s bullish reversal candle. Hence, this means that STI is still not ready to take on the bullish momentum to push STI out of the sideways range. However, this further confirms that the support at around 3190 level is holding firmly and refusing to break. With support holding, this sideways range will likely to continue to hold firmly too.

 

The mid-term indicators continue to show weakness in the bullish underlying. Bearish divergence signal continued to show but there is lacking further bearish reversal confirmation. Shorter-term indicators continued to thread on the bearish side but they are unable to push the market lower despite such indications. Further bearishness are expected in the shorter-term but it is currently hard to identify the strength of the bearish movement.

 

Therefore, it is much easier to conclude that STI will continue to trend within its sideways range between 3190 – 3270 levels currently. Momentum is definitely skewing more towards the bearish side but it is not enough to convince the market to break the support at 3190 level. With 20 week MA acting as a confluence with the support of 3190 level. It will be much harder for STI to break this support level this time round. I am confident that this support level will continue to hold firmly this week. Holding support level will lead to rebound in price. This rebound will, however, unlikely to be strong also. Upside will be capped at 3270 level again.

 

Support level at 3190 level will continue to be the key support level to watch out. Breaking this support level will indicate a deeper retracement movement which can lead to correctional movements. Breaking 3190 indicates that the bulls have lost its control in the market and it will definitely attract a lot of bears into the market. Thus, this will lead to strong downside movements towards 3100 support level. With this, it will be easier to anticipate STI’s movement.

 

In conclusion, the odds of bearish movement are definitely higher currently. However, the support at 3190 level must break in order to confirm this. The market has been holding this support level firmly for weeks and it is unlikely to break this coming week. Therefore, STI will likely to continue its sideways actions within 3190 – 3270 levels range. Going beyond this range is unlikely unless there is any drastic news that comes in as a surprise to the market.

 

What to watch out for this week:

1)      Testing of 3190 support level.

2)      Breaking of 3190 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.

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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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