Straits Times Index facing resistance at 3530 level.

Straits Times Index facing resistance at 3530 level.
Straits Times Index facing resistance at 3530 level.

The Straits Times Index continued its bullish streak last week. Buyers were positive of the upside and were seen buying during the early week. This leads STI to reach its resistance level at 3530 level. However, the resistance level at 3530 level seems to be firm. This prevented STI from going higher as profit takers were seen dominating the market. The profit taking actions were not strong enough to push STI lower. The market continued to stay close to its resistance level which helped to maintain the early gains during the week. Hence, STI was able to close at 3520.56 level with 31.11pts up for the week.

Since STI is now trading at resistance level, the key question will be whether STI will be able to break this resistance level.

Let’s get some clues from the chart.

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

Support: 3450, 3355 (20 week MA), 3270 (50 week MA)

Resistance: 3530, 3630, 3700


Candlestick – Short white candle.

Histogram – 2 Gs. No bearish divergence. No bearish crossover.

RSI – At 76%. No Bearish divergence. Overbought.

Stochastic – At 71.8%. No bearish crossover yet.

Bollinger Band – Testing upper band. Band expanding.


Current movement of STI is still within my expectation as it has yet to go beyond 3530 resistance level yet. Short white candle tested the resistance level indicating that the market is cautiously testing the resistance level. There were no attempts to break this resistance level yet as the candle did not shows long upper shadow. Therefore, it seems that this resistance level is preventing the upside for now. The ability to break this resistance level will depend on the momentum that STI is currently trading in. Reading off the indicators will help.


The mid-term indicators are still trending in the bullish mode. MacD is still not showing any signs of fatigue and will likely to continue to trend higher. However, RSI is still in overbought zone but it is started to trend slightly lower yesterday. Shorter-term indicators are also showing bullish readings. Both Histogram and Stochastic are in bullish momentum and are unlikely to trigger bearish signal for now. Hence, bullishness is expected to continue while overbought is seen in the mid-term momentum.


Since bullishness is being maintained, STI will likely to continue to test the resistance level of 3530. Breaking this resistance level is possible this week despite the cautiousness last week. Once this resistance level is broken, STI will be approaching its next resistance level at 3630 level. So, it is important to watch out for the breakout that might happen this week.


However, if STI failed to break this resistance level this week, it will indicate that this resistance level is strong. STI will either choose to hover close to 3530 resistance level or starts to trade lower. If STI is to start trading lower than 3494 level, it will indicate bearishness and deeper retracement action will likely to happen. Retracement target will be its resistance turned support level at 3450. This support level will help STI to prepare for stronger bullish momentum going forward.


In conclusion, the bullish momentum will be continuing this week despite its cautiousness last week. Breaking out of 3530 resistance level can happen this week. When this happens, STI will be approaching 3630 resistance level. However, if breakout fails to happen, profit taking pressure will set in which can cause STI to hover close to 3530 level or retrace towards 3450 level.


What to watch out for this week:

1)      Breaking of 3530 resistance level.

2)      Testing of 3630 resistance level.

3)      Testing of 3450 support level.

 Trading strategy to adapt right now:

-        Long traders can hold on to their long positions.

-        Shortists should wait for resistance level to be confirmed.

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