Straits Times Index facing downtrend pressure

Straits Times Index facing downtrend pressure
Straits Times Index facing downtrend pressure

Straits Times Index entered another week of bearishness as concerns of US trade tariffs can have economic impact on the world trade. Traders in the market were quick to exit the market on Monday by creating a gap down action which breaks the key support level of 3355 level. Breaking 3355 level indicates a downtrend formation for STI. STI was reluctant to drop further during the week as it managed to stay above 3295 level until Thursday. However, fresh concerns led STI to break this level as it starts to head towards its next support of 3270 level. This support level was being tested and prevented STI from dropping further last Friday.

So with these bearish actions, STI closed the week at 3287.40 level with 69.33pts down. Will this bearish sentiment continue for this week? Or will STI start to rebound?

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

Trend: Downtrend, 20 weekly MA down, MacD slight below 0.

Support: 3270, 3190 (100 week MA), 3110 (200 week MA)

Resistance: 3550 (50 week MA), 3450, 3530 (20 week MA)

Observations:

Candlestick – Black candle.

MacD – 6 Rs. No Bullish crossover. No bearish divergence.

RSI – At 31.4%. No bearish divergence. Nearing RSI oversold.

Stochastic – At 7.5%. Possible bullish crossover. Oversold.

Bollinger Band – Out of lower band. Band expanding.

Conclusion:

Straits Times Index had broken the key support level at 3355 level. Breaking this key support level had indicates that the trend of STI is now switching towards downtrend formation. Uptrend or sideways movement have already ended. Therefore, further downside is to be expected to happen. What are lacking right now are lower low formation and a lower high formation which will further confirm the downtrend formation. Therefore, what we will be watching out for in the coming weeks will be whether STI will be forming a lower low formation.

 

The mid-term indicators had switched to the bearish side currently. MacD line is now below 0 and RSI is certainly in the bearish range. This means that the downtrend movement will likely to be sustainable and hence, downside is expected to persist. Shorter-term indicators continued to be on the bearish side. However, this bearishness is being extending into the oversold region. Stochastic might start to trigger a bullish crossover if there is bullish actions this week.

 

Therefore, from the indicators, it seems that the market is currently oversold. There is strong possibilities for a rebound action to happen which will help STI to form a lower low formation. Immediate support stands at 3270 level which STI managed to test last week. Hence, the possibilities for this week will either be a consolidation movement to form strong 3270 support level or a quick rebound towards is resistance of 3355 level. The key thing is that STI must hold firmly at 3270 support level before a higher low can be formed. Do expect selling pressure to continue at the start of this week but as long as 3270 level holds, there will still be opportunities for STI to rebound towards 3355 resistance level.

 

However, if 3270 support level fails to hold, STI might be seeking for the next support level. The next support level stands at 3190 level which is very close to the 100 week MA line which is around 3220 level. These support levels will be strong support level which will be very likely to limit STI’s downside. It will be the next better support level for STI to rebound and form its lower low formation.

 

In conclusion, the Straits Times Index can continue to face bearish pressure this week. It might first attempt to consolidate at 3270 support level before a proper rebound can happen. If a rebound happens, it will likely to be sustainable but the upside can be cap at 3355 level. But if the support level at 3270 level fails to hold, STI is then expected to retrace towards 3190 – 3220 levels in order for it to form another support in order for a rebound to happen.

 

What to watch out for this week:

  1. Testing of 3270 support level.
  2. Breaking of 3270 support level.
  3. Breaking of 3355 resistance level.
  4. Testing of 3190 support level.

Trading strategy to adapt right now:

  • Long traders should stay away from the market
  • Shortists can start to consider positions at resistance levels.

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