Straits TImes Index challenging to breakout into uptrend movement. | Jay Chia - Your Financial Mentor

Straits TImes Index challenging to breakout into uptrend movement.

Straits TImes Index challenging to breakout into uptrend movement.
Straits TImes Index challenging to breakout into uptrend movement.

Straits Times Index faced a week of cautiousness as many were searching for reasons to sustain the bullishness from the previous week. The week started with positiveness but it failed to sustain the next day. This is probably due to the public holiday in the middle of the week. With uncertainty in the market, traders are more reluctant to hold their positions over the weekends or holiday period. Trading volume fell during the week. This also shows that market participants are staying away last week. Furthermore, with US job data reporting last Friday, many traders decide to stay cautious and exited the market. This caused STI to lose its gains last Friday. These reasons supported the tight trading range of 2830 – 2870 levels last week. Only 0.67pts were gained last week; ending at 2847.04.

Last Friday night, DJI reacted bullishly after the announcement of job data. This is against the worry of drop. Will STI be able to react similarly to DJI for this week?

Trend: Possible uptrend to sideways, 20 wma starting to turn up, MacD near 0 level.

Support: 2800 (20 week MA), 2730, 2670

 Resistance: 2860 (50 week MA), 2900, 2950, 3010

Observations:

Candlestick – Doji like candle with black body.

Histogram – 3Gs. MacD close to 0 line

RSI – At 52.2%. At 50% line.

Stochastic – At 57.4%. Bullish crossover confirmed.

Bollinger Band –At mid line. Band starting to turn upwards.

Conclusion:

The price movement last week is showing clearly that STI is facing a strong 50 weekly MA resistance line. Standing at 2860 level, it had been tested for the third time during the past few weeks. This resistance level can be a good indication on whether STI will be forming an uptrend movement. However, before this uptrend movement can be conceived, there might be some consolidation actions. What happened last week can be a consolidation action. The next key question is whether this consolidation action will take a longer time or a retracement action will start from here.

 

The mid-term indicators are at indecisive levels as it is unclear of whether it should be switching its momentum to bullish one. MacD is still getting closer to the 0 level but is yet to be above it. RSI is now at 50% level but it might not have broken the RSI resistance. Hence, there might still be risk of reverting back to bearish momentum. Shorter-term indicators are showing bullish strength despite weak bullish closing last week. There are no signs of weakness currently. Hence, there is a possibility that STI will be able to start off the week bullishly.

 

A bullish start for the week will mean that STI is reacting to DJI’s bullish closing on last Friday. When this happen, STI will be trading above 2860 level. In order for STI to sustain its bullish start, it must trade above 2880 level in this week. After which, it will seek for its resistance at 2900 level. If the bullish sentiment is strong, it can even reach the next resistance level of 2950 level. When this scenario happens, it will indicate that the underlying momentum of the market had turned bullish. Hence, what come next will be a more sustainable bullish trend.

 

However, the underlying may still be bearish right now. Retracement actions still can seep into the market this week. 2860 resistance level will hold firmly and attract selling pressure. Once this happens, STI will then be seeking for its immediate support at 2800 level. Consolidation movement will then happen at this level before it can decide its next move again. This scenario will happen if the market continues to be uncertain of the future outcome.

 

In conclusion, the Straits Times Index is now trading at a key level which can determine its movements for the next few weeks. Resistance level at 2860 level is indeed strong and it can cause STI to retrace back to its past levels. However, shorter-term indicators are giving positive signs which can aid STI to break this resistance level. Once STI is able to trade beyond 2880 level, it will mean that and uptrend momentum is established. Going beyond this level can bring STI towards 2900 or even 2950 levels. If this bullish sentiment fails to conceive this week, do expect STI to retreat towards 2800 level.

 

What to watch out for this week:

1)      Testing of 2860 resistance level

2)      Breaking of 2860 resistance level

3)      Testing of 2900 resistance level

4)      Testing of 2800 support level

 Trading strategy to adapt right now:

-          Long traders can take cautious long positions if there is a breakout.

-          Shortists may need to close their short positions if downtrend fails to form.

 

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