Straits Times Index boosted by property cooling measures

Straits Times Index boosted by property cooling measures
Straits Times Index boosted by property cooling measures

Straits Times Index managed to end another week bullishly and continued to head towards its strong resistance at 3160 level. Volatility was seen during the week; moving like a headless creature. The highest that STI had attempted to reach is at 3150 level which was clocked on Wednesday. However, this gain was quickly given back on Thursday where strong selling pressure happened due to falling oil price. On the last day of the week, the day started weakly until Singapore Government announced the easing of property measure. The market reacted by pushing property prices higher, causing STI to make back its gains for the week. Hence, STI is able to close at 3133 level with 11.01pts up for the week.

This week will be the key week for many market watchers. The confirmation of US interest rate hike. Many have already anticipated the hike to happen and might have reacted ahead of this announcement. How will STI react to this announcement this week?

Let’s gather some chart possibilities for STI.

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 spinning top.

Histogram – 3 Rs. No bearish crossover yet.

RSI – At 73.4%. Overbought. Starting to dip.

Stochastic – At 78%. Just exited overbought. Bearish crossover confirmed.

Bollinger Band – Closer to upper band. Band expanding.

Conclusion:

Straits Times Index continues to reaffirm its support at 3100 level last week. This can mean that it is strengthening its support level at 3100 level before it starts to attempt to test its resistance at 3160 and break beyond that level. But this support level remains a crucial support level as it will help to determine whether there will be a deeper retracement action. Furthermore, with the upcoming US interest rate hike, volatility is very likely to be seen. Therefore, it is important to access the underlying momentum currently to reaffirm the possibilities of STI.

 

The mid-term indicators are still continuing on its bullish momentum and are still not showing clear signs of weakness yet. Overbought condition is still seen in RSI currently but it is starting to peak. Hence, there is a higher possibility of retracement action now. Shorter-term indicators are now at the bearish side despite the bullish closing for the past weeks. This divergence can indicate that STI is attempting to do a sideway retracement instead of a traditional downward retracement.

 

With the possibilities of sideways retracement to happen, it will mean that the key support level of 3100 will be holding. This will imply that the market will continue to test 3100 support level till it has found a satisfactory period to continue its uptrend movement. Hence, the sideways range for this period can be identified to be between 3100 – 3160 levels before an upside breakout can occur. If upside breakout occurs, it will mean that STI will be heading towards its next resistance at 3240 level.

 

But, if this scenario fails to occur, it can only mean that STI will be choosing the retracement path. This will lead to breaking of the key support at 3100 level. Once this support level breaks, it will attract sellers into the market to push STI towards 3010 support level. When this happens, STI’s uptrend will turn out to be a more classical uptrend movement with higher low being formed. Entering the market at this point is a lot less risky than entering at current level.

 

In conclusion, nothing much has changed in Straits Times Index after last week’s movement. The odds of a sideways retracement have increased. This implies that STI might be trading in a tight range between 3100 – 3160 levels. Breaking out of upper level of 3160 will bring STI towards its resistance of 3240 while breaking out of lower level of 3100 will bring STI towards its support of 3010. Either way, one has to be prepared to react. Personally, breaking towards 3010 will be a better option for me to build my stock portfolio.

 

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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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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