Straits Times Index to consolidate this week

Straits Times Index to consolidate this week
Straits Times Index to consolidate this week

The Straits Times Index had a bullish week last week but it failed to reach the recent high it had achieved last month. The start of the month was strong as STI managed to gapped up on Monday which brought strong bullish momentum to break its resistance at 3530 level. STI managed to sustain its resistance level till Wednesday. On Thursday, market participants were sceptical of the strength and started selling. This brought STI back below 3530 level. Further selling pressure pushed back to the gap level which it had created on Monday. Despite the bearish movements at the end of the week, STI was still able to maintain gains of 26.57pts. Closing at 3512.14 level.

With bullish movement last week, will STI be able to start off an uptrend movement?

Let’s look at STI’s chart.

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

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

Resistance: 3530, 3630, 3700

Observations:

Candlestick – Black shooting star like candle.

MacD – Turned green. No bearish divergence.

RSI – At 56.7%. No bearish divergence. Bouncing off RSI support.

Stochastic – At 62.1%. No crossover formed

Bollinger Band – Between mid band and upper band. Band contracting.

Conclusion:

The rebound last week had helped to confirm the support at 3450 level. This strong support level had increase the chances of STI forming an uptrend formation. However, uptrend can only be confirmed if STI is able to form a higher high. 3574 level is the high that was formed during Feb. STI seems to be struggling to head higher last week despite the strong closing. Shooting star pattern could have been formed which indicates that the resistance at 3530 level is still firm. With a mix of bullish and bearish movement, it is hard to determine the direction that STI is opting for right now. Therefore, more affirmations are needed to identify the direction for STI currently.

 

The mid-term indicators continued to hover bullishly which will help STI to maintain its bullishness. No signs of weakness are seen currently in STI. Shorter-term indicators are now poising for the bullish side as Histogram start to trigger bullish reading. However, Stochastic is of worry as it might trigger a bearish cross if STI fails to main its bullishness this week. Overall, bullish momentum is likely to continue despite some concerns.

 

With bullish affirmation from the indicators, STI will probably attempt to head higher. Similar to last week, STI will likely to continue to attempt to break its resistance level at 3530 level. This resistance level will still be a tough level to break. Breaking this resistance level will require strong conviction by the market participants. If STI is to break this resistance level, it will then test its recent high of 3574 level which will help us to confirm whether STI will be going uptrend. Going beyond 3574 level will bring STI towards its next resistance level at 3630 level.

 

3530 resistance level can still be a tough resistance level to break. Furthermore, in the daily chart, STI’s gap support that was created last week is between 3495 – 3517 levels. This gap support can create a short-term downside pressure which was due to the “gap closing” effect. Hence, STI might have a possibility of testing 3517 level before it can head higher. Going below this level is unlikely for now as strong short-term support can be seen in the daily chart which show 2 MA line confluencing at 3505 level. However, if this level breaks, it will mean that STI is heading towards its support level of 3450 level to test it again.

 

In conclusion, the Straits Times Index is still sitting on the fence despite strong bullish movements last week. This will still need to trade above 3530 level before it can gain further upside momentum. 3547 recent high will continue to be the key level to confirm STI’s uptrend formation. However, STI will likely to attempt to cover its gap between 3495 – 3517 levels before it can attempt to break 3530 resistance level. Therefore, do expect STI to consolidate around 3500 level again before it can head higher.

 

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 should stay sidelines too.

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