Straits Times Index to consolidate at 3530 level.

Straits Times Index to consolidate at 3530 level.
Straits Times Index to consolidate at 3530 level.

Straits Times Index was seen trading firmly last week as it refused to continue its bearishness. The week started with bearishness which tested the support of 3530 level. This support level held firmly for the next 2 days despite attempts to break it. Buyers were supporting the support level of 3530 level by pushing the index back up after testing the support level. However, upside was limited during these few days. It was only during Friday’s movement, the bullish sentiment was able to prevail. Friday’s bullishness had helped STI to close the week with 24.79pts up; ending at 3570.17 level.

With Friday’s bullish momentum carry on this week? Or will STI be attempting to break the support level at 3530 level?

Let’s look into STI’s chart to determine the outcome.

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

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

Resistance: 3630, 3700, 3860

Observations:

Candlestick – Bearish engulfing pattern failed to confirm.

MacD – Many Gs. Bullish crossover. No bearish divergence.

RSI – At 52.9%. No bearish divergence. At RSI support.

Stochastic – At 75.6%. Bearish crossover formed. Just out of overbought.

Bollinger Band – At upper band. Band expanding.

Conclusion:

It is clear that the Straits Times Index is holding firmly at its support level of 3530 after last week’s movement. A white hammer like pattern was formed at this support level which indicates the strength of the support level. However, this does not indicate that STI will be attempting to trade higher this week. Clear uptrend can only happen when STI is able to break its resistance at 3630 level. So as for now, there are still possibilities of STI consolidating at 3530 support level before it can head higher. Indicators should give us a more decisive reading.

 

The mid-term indicators are starting to look bullish after last week’s movement. MacD formed a bullish crossover signal which can help STI to maintain its bullish momentum. RSI had recovered above the 50% line which is another indication of uptrend sustaining. However, with RSI hovering at the 50% level since early this year; it can also be an indication of sideways movement. Shorter-term indicators are starting to skew towards the bearish side despite a bullish closing last week. Stochastic triggered a bearish crossover which can call for bearish action to happen this week. Histogram continues to be bullish but if bearish action is to happen this week, it can also turn bearish too.

 

Therefore, with the readings from the indicators, it seems that the market is showing a conflict in signals. Mid-term seems to be in bullish side while short-term is in bearish side. This also leads me to think that STI might be in a sideways momentum currently. Giving the benefit to the short-term indication first, we might see STI to face bearish pressure this week. This will mean that STI will attempt to test its support at 3530 level again. Chances of this support level breaking is going to be low as the 20 week MA line is getting close to the current support level. Any downside should be limited to 3500 level for this week as the underlying momentum of STI is bullish.

 

But if STI starts to trade below 3500 level, it will lead to further selling pressure in STI. The next support level for STI will be at 3450 level. Breaking 3500 level will also further confirms the possibilities of sideways formation in STI. Hence, sideways support of 3355 level will be target for any bearish outcomes. However, on the other hand, with bullish mid-term indication, STI have high chance of forming uptrend formation. What is lacking right now is a higher low formation. 3500 – 3530 support levels are good level to form higher low formation. As long as STI is able to hold at 3500 level and rebound towards 3630 level, it will elevate the opportunities of STI forming an uptrend which can lead to resistance levels of 3700 or even 3860 levels.

 

In conclusion, the Straits Times Index is currently at a very crucial level to determine if it will be forming uptrend or sideways movement. For this week, STI will likely to continue to attempt to test 3530 support level with downside limited to 3500 level. As long as these support levels hold, STI will be able to attempt to break 3630 resistance level after that. This will be the best case scenario for STI as it will be forming uptrend. Otherwise, STI might continue its sideways formation with a support level of 3355 level.

 

What to watch out for this week:

  1. Testing of 3530 support level.
  2. Breaking of 3530 support level.
  3. Testing of 3480 support level.
  4. Testing of 3630 resistance level.

Trading strategy to adapt right now:

  • Long traders take cautious positions when support level at tested.
  • Shortists should stay sidelines.

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