Straits Times Index close to key resistance of 3630 level.

Straits Times Index close to key resistance of 3630 level.
Straits Times Index close to key resistance of 3630 level.

The Straits Times Index was struggling to find direction last week as profit takers prevented the market to raise higher. During every day, the market opening with bearish action; attempting to push STI to a lower level. However, there will always be willing buyers to hold the market despite strong selling attempts. These bullish buyers tend to dominate the market daily which helped STI to maintain its current level. Therefore, last week turned out to be a flat week. Only 3.83pts was gained. Straits Times Index ended at 3577.21 level.

STI inched higher last week after 2 weeks of strong gains. Has the bullish momentum stopped?

Let’s evaluation STI’s chart for clearer picture.

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

Support: 3530, 3450, (20 week MA), 3350 (50 week MA)

Resistance: 3630, 3700, 3860

Observations:

Candlestick – Short white candle.

MacD – 3Gs. Possible bullish crossover. No bearish divergence.

RSI – At 51.9%. No bearish divergence. At RSI support.

Stochastic – At 84.4%. No Bearish crossover. Just entered overbought.

Bollinger Band – Closer to upper band. Band expanding.

Conclusion:

The Straits Times Index managed to continue its bullish streak last week. This further confirms that STI is no longer going in a possible downtrend momentum but it is now attempting to either form sideway or uptrend. It is now coming close to its year high of 3611 level which it has yet to break. Last week’s candlestick ended with a short white candle which indicates that the market is facing possible resistance level from the year high. However, there is no bearish indication yet and hence; one should not conclude that the year high resistance is preventing STI from going higher. More evidence should come from the indicators itself.

 

The mid-term indicators are still trending in the bullish momentum. With MacD creating a possible bullish crossover, this bullish momentum will likely to gain further bullish traction. RSI continued to hold firmly at the 50% level and will likely bring further bullish momentum to STI. Shorter-term indicators are also showing bullish readings currently. Despite weak bullish movement last week, the shorter-term indicators are not showing any signs of weakness yet. However, Stochastic is now in overbought which can bring upside limitation.

 

Bullish momentum is definitely intact in STI currently. Therefore, it is possible for STI to continue to trade higher for this week. It will first test its year high at 3611 level first before it will be able to head higher. Having the ability to break 3611 level will lead STI towards uptrend formation. After which will be the key resistance level at 3630 level. If STI is able to break this resistance level this week, uptrend formation will be confirmed and this will bring a lot more upside possibilities for STI. The next resistance level will be at 3700 or a much further resistance at 3860 level.

 

Despite the confident bullish direction from the indicators, there is still a risk of bearishness. As STI is currently forming possible sideways also, the recent high resistance at 3611 level can force STI to retrace. If 3611 resistance level does not produce selling pressure, 3630 key resistance level can also do so. With overbought reading from Stochastic, STI upside can be limited by these 2 resistance levels. If selling pressure happens at these 2 resistance level it will affirm that STI is trading in a sideways range between 3355 – 3630 levels.

 

In conclusion, the Straits Times Index is currently trading in a crucial period. There is potential for STI to start an uptrend formation. As long as it is able to break 3630 resistance level, uptrend movement can lead STI towards 3700 or 3860 levels. However, if STI is unable to head beyond 3630 level this week, selling pressure can cause STI to form sideways movement. Sideways movement will bound STI in a tight range between 3355 – 3630 levels.

 

What to watch out for this week:

  1. Testing of 3630 resistance level.
  2. Breaking of 3630 resistance level.
  3. Testing of 3450 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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