Straits Times Index continued to trend in crucial level.

Straits Times Index continued to trend in crucial level.
Straits Times Index continued to trend in crucial level.

Straits Times Index faced a volatile week last week as it struggled to find fresh bullish leads to sustain it rebound attempts. The week started with a strong rebound which helped STI to get closer to the 20 week MA resistance line around 3500 level. However, it was unable to find strong bullish reasons to lift the index towards that level. Its upside seems to cap at 3490 level. On last Friday, fresh fears on the European situation pushed the market lower. Friday’s movement caused STI to return most of the gains of the week which caused STI to end with only 8.86pts up. Ending at 3436.37 level.

Although STI attempted to rebound last week, it seems to be lacking of bullish conviction to trade higher. Will STI be able to continue to attempt to rebound today?

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

Trend: Uptrend, 20 weekly MA slightly down, MacD above 0.

Support: 3350 (50 week MA), 3270, 3190

Resistance: 3450, 3530 (20 week MA), 3630

Observations:

Candlestick – Inverted hammer pattern.

MacD – 4 Rs. No Bullish crossover. No bearish divergence.

RSI – At 45.6%. No bearish divergence. RSI support broke.

Stochastic – At 9.7%. No bullish crossover yet. Oversold.

Bollinger Band – Close to lower band. Band tightening.

Conclusion:

Straits Times Index managed to stop its downside movement last week despite the possibilities of testing its 50 week MA line at around 3400 level. The inverted hammer pattern that was formed last week had implied a possible bullish reversal. However, the upper shadow of the candle also indicated that STI is facing the resistance at 3450 level. This resistance level had prevented STI from rebounding further last week. Therefore, it is hard to determine whether if STI is able to rebound further currently. But one thing for sure is that the downside will likely to be limited.

 

The mid-term indicators continued to show bullish weakness last week. RSI is still below the 50% level but it seems to be attempting to rebound back above 50% level. MacD line is still healthily trending above the 0 level but it is now getting closer to the 0 level. Shorter-term indicators are still on the bearish side despite slight rebound last week. Stochastic remains to be in the oversold zone which will indicate limited downside. However, there are no side of bullish signals in the shorter-term indicators currently.

 

With no clear bullish indications currently, STI might continue to face bearish pressure this week. This means that STI will continue to attempt to reach its 50 week MA line at around 3400 level. This MA support line must hold in order for it to sustain its uptrend formation. Otherwise, breaking this support line will indicate that STI is trending in sideways. Sideways support level stands at 3355 level which is a strong support level for STI currently. This is an important support level as breaking this support level will indicate a downtrend formation. Therefore, STI will likely to be hovering around these support levels for this week.

 

If STI is able to hold at the 50 week MA line, STI will then be able to form its higher low formation which is crucial for uptrend formation. But in order for a successful higher low formation, STI must first be able to trade above 3450 level. After which, there will be another hurdle for STI to past through. That will be the 20 week MA line at around 3500 level. Breaking this resistance line will give STI more affirmation of uptrend formation. Hence, for this week, STI will have to face these 2 resistance levels.

 

In conclusion, the Straits Times Index continues to stay at the crucial level despite a volatile week. 3400 support level remains crucial for STI as breaking it will lead to failure of uptrend formation. On the other hand, STI will also be facing resistance at 3450 level which it had trouble breaking last week. Even if it can break 3450 resistance level, the next hurdle will be at 3500 level. With this tight trading range currently, STI will probably be trapped within these levels this week. A decisive movement must happen in order for a more conclusive direction to happen.

 

What to watch out for this week:

  1. Testing of 3400 support level.
  2. Breaking of 3400 support level.
  3. Breaking of 3450 resistance level.
  4. Testing of 3350 support 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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