Straits Times Index sitting on the fence

Straits Times Index sitting on the fence
Straits Times Index sitting on the fence

Last week, the Straits Times Index faced a streak of bearish actions as market participants were reacting US interest rate hike concern during the early week. Bullishness kicked off the week but it was unsustainable. Sellers dominated the market on Tuesday which prevented STI from reaching out for this year’s high at 3611 level. Powell, US Fed chief, had indicated the possibilities of interest rate. This comment was not well received by the market. To make the matter worse, US announced that they will implement import tariffs in steel and aluminium. This shook the market further and caused defensive cries throughout the world. No doubt, Singapore market reacted according and ended the week below 3530 resistance level. 54.02pts was lost during the week as the market closed at 3479.2 level.

Bearish reaction last week had caused traders to think twice of the possibilities of uptrend continuation. Is STI facing the risk of downtrend formation currently?

Let’s evaluate STI’s chart for clarity.

Trend: Possible sideways to downtrend, 20 wma still up, MacD above 0.

Support: 3450 (20 week MA), 3350, 3270 (50 week MA)

Resistance: 3530, 3630, 3700


Candlestick – Dark cloud cover pattern.

MacD – Reversed back to red. No bearish divergence.

RSI – At 52.8%. No bearish divergence. Back to RSI support.

Stochastic – At 54.8%. Bullish crossover.

Bollinger Band – Heading back to mid band. Band contracting.


Straits Times Index failed to stay above the resistance of 3530 level last week. This is an indication that the bullish momentum has failed to continue. This also indicates that the resistance at 3530 level is holding well and will probably prevent STI from going further. With bearish reversal pattern happening, downside pressure is likely to continue this week. However, this bearish reversal pattern requires further downside confirmation before we can conclude the likelihood of downside pressure. Therefore, more assurance should come from the indicators.


The mid-term indicators failed to show further strength in its underlying bullish momentum. It seems to be reverting back to its weakness as RSI returned to its support level. MacD failed to form a crossover and thus, strengthening of bullish momentum is unlikely now. Shorter-term indicators are currently giving mixed signals. Histogram failed to confirm its bullish signal while Stochastic just triggered its bullish signal. It is currently hard to determine the direction that STI will take based on the indicators currently.


With STI currently sitting on the fence, it will be more prudent to be cautious. If bearishness is to persist this week, it will mean that STI will be testing its support level at 3450 level. This support level is an important support level as it confluences with the 20 week MA line. Breaking this support level will confirm STI’s bearishness and can lead to strong selling pressures. Therefore, it is important to watch out for this support level this week. If this support level fails to hold, it will also confirm STI’s lower high formation. Lower high formation will indicate that STI is forming downtrend. Downtrend formation can lead STI towards not only its recent low support of 3355 level, it can also lead STI towards a much lower support level at 3270 level. Hence, 3450 support level is crucial.


If STI decides to hold at its support level of 3450 and rebounds, it will mean that the underlying bullish strength is still intact. Staying intact will increase the odds of uptrend formation. Holding at this support level will probably lead to consolidation movements at 3450 level before it can attempt to head higher. The key resistance will still be at 3530 level. Only by breaking this resistance level can indicate further upside for STI currently.


In conclusion, the Straits Times Index is now sitting on the fence. Bearish movements are likely to continue this week but we have to watch for this crucial support level at 3450. Breaking this support level can lead to further and stronger downside movement in STI. Otherwise, we can expect STI to hover between 3450 – 3530 levels during this week. Going above this range will require an abrupt change in market sentiment towards positiveness.


What to watch out for this week:

  1. Testing of 3450 support level.
  2. Breaking of 3450 support level.
  3. Testing of 3530 resistance level.
  4. Testing of 3355 support level.

Trading strategy to adapt right now:

  • Long traders should stay sidelines unless clear uptrend is being formed.
  • Shortists can take short positions if there is bearish confirmation.

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