Straits Times Index facing strong resistance. | Jay Chia - Your Financial Mentor

Straits Times Index facing strong resistance.

Straits Times Index facing strong resistance.
Straits Times Index facing strong resistance.

Straits Times Index experienced a volatile week last week as series of uncertainties were talked about last week. Fed rate hike had been in the talk last week with many speculated that it will remain. In the meantime, oil prices were seen sustaining above $50 level and this sparks fears that it will not be sustainable. Hence, it is natural to see the market to spike upwards early last week but it failed to sustain at the end of the week. Currently, oil price concerns are dominating the volatility of the market. For the whole week, STI only gained a mere 13.74pts, ending at 2822.97 level.

Will STI be able to continue its upward movement this week? Will profit taking pressure start to happen this week?

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

Support: 2800 (20 week MA), 2740, 2670, 2620

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

Observations:

Candlestick – Doji like candle with long upper shadow.

Histogram – 3Gs. MacD close to 0 line

RSI – At 48.9%. Around 50% line.

Stochastic – At 58.7%. No bearish crossover

Bollinger Band –At mid line. Flat band.

Conclusion:

Last week’s continuation of rebound had helped STI to be able to head towards its 50ma weekly resistance line. However, as it was seen by the candle formation last week, 50ma weekly resistance line seems to be holding strongly. This 50ma weekly resistance line had prevented STI from going higher during the month of April. Hence, there is a possibility that it might happen again. In order to confirm the possibilities of selling pressure after being resisted, we should look for clues in the indicators.

 

The mid-term indicators are starting to show further bullish signs. However, it is still not clear whether the momentum had been changed to bullish one. MacD line has yet to crossover to the positive region but RSI seems to be sustaining above the 50% level. Further bullishness is needed in order for the mid-term indicators to be bullish. Shorter-term indicators are clearly on the bullish side and yet to form any signs of bullishness. Hence, there might further attempts to trade higher in the early week.

 

With possibilities of bullish attempts in the early week, STI will likely to continue to attempt to reach out for its 50ma weekly resistance at around 2900 level. This resistance level will continue to be a key resistance level to determine if STI will revert its trend back to uptrend. Once this resistance level is broken, it can reach 2950 level or even reach up to 3010 level.

 

However, based on the history, 50ma weekly resistance line is a very strong resistance line. Selling pressure can also set in during early of the week as the candle formation last week shows that the bullish strength is starting to weaken. To confirm the bearishness, STI must first break its immediate support at 2800 level. This support level is currently near to the 20 weekly MA at around 2776 level. Hence, STI might attempt to test this support level if bearishness sets in. Breaking this level will mean that further selling pressure will set in and push STI towards 2740 level.

 

In conclusion, the Straits Times Index is now in a vulnerable stage. If it fails to maintain its bullish momentum this week, selling pressure might set in. The key to determine the bearishness is the immediate support level. If STI break 2776 20ma weekly support line, it will mean that the bullishness have failed to sustain. This will then eventually lead to further downside movement towards the next support at 2670 level. However, there is still hope in the bullish side. If STI is able to sustain able 2800 level early this week, STI will then be able to seek its 50ma weekly resistance line at around 2900 level. But this resistance line will likely to stay firm for this coming week.

 

What to watch out for this week:

1)      Testing of 2800 support level

2)      Breaking of 2800 support level

3)      Testing of 2900 resistance level

4)      Testing of 2740 support level

 Trading strategy to adapt right now:

-          Long traders should look to exit some positions.

-          Shortists are to be ready for shorting signals.

 

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*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.

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