Property curbs caused further bearishness in Straits Times Index

Property curbs caused further bearishness in Straits Times Index
Property curbs caused further bearishness in Straits Times Index

Straits Times Index continued another round of bloodshed drop as the market not only reacted to the concerns of the US-China tariffs situation, also the announcement of property stamp duty measures introduced by the Singapore government. During the week, it started off with a strong attempt to rebound above 3270 level. However, sellers still overwhelmed the market which forced STI to be below 3270 level. On Wednesday, STI started to attempt to rebound towards 3270 level which lasted till Thursday. This rebound hits another roadblock. On Thursday evening, Singapore Government announced an increase of stamp duty on private property purchases. This triggered a knee jerking reaction in the market on Friday morning. Property related counters took a hit. Hence, this caused STI to drop 64.89pts within a day. With majority of the movements happening on Friday, STI closed at 3191.82 level with 76.88pts down.

Straits Times Index had ended the week with another strong bearish movement. How low will STI go before a rebound can happen? Should be exit the market or should we start to buy now?

Let’s look into STI’s chart to understand the direction it is heading this week.

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

Support: 3190 (100 week MA), 3110 (200 week MA), 3020

Resistance: 3270, 3550 (50 week MA), 3450 (20 week MA)

Observations:

Candlestick – Long black candle.

MacD – Many Rs. No Bullish crossover. No bullish divergence.

RSI – At 30.4%. No bullish divergence. Nearing RSI oversold.

Stochastic – At 7.1%. Possible bullish crossover. Oversold.

Bollinger Band – Out of lower band. Band expanding.

Conclusion:

Straits Times Index broke another support level at 3270 last week. This breakdown proves that the bearish pressure is very strong currently and it will be hard to identify where will be the support level that STI will attempt to rebound. 100 week MA seems to be broken while 200 week MA line is now being threatened to be broken. With this, it is very clear that STI is now establishing a downtrend movement in its weekly chart and this trend can last for months. However, what is lacking right now is a rebound for lower high formation.

 

The mid-term indicators continued to be in bearish momentum currently. MacD line is definitely not showing any signs of weakness and will likely to continue to lower. RSI is nearing the oversold line but yet to enter. Hence, the mid-term momentum will likely to continue to trend bearishly. Shorter-term indicators are also clearly on the bearish side. Oversold readings in both Stochastic and Bollinger Bands continued this week. So far, there are no clear bullish signals in the short-term and it is hard to determine if there will be a rebound this week.

 

As short-term indicators are now trending deeply in the oversold zone, there is a chance for STI to rebound for a lower low formation. Currently, STI is testing its support level at 3190 level. Given that it managed to close slightly above this support level, it can mean that this support level is holding well. Hence, this can also mean that STI can stage a rebound at this support level. If a rebound happens this week, it will likely to trigger bullish signals in the indicators. Before these can happen, STI must end positively and also close higher than the opening of week. Reaching resistance at 3270 can be very unlikely for this week.

 

But if STI fails to close above the support of 3190 level, it will mean that the bearish momentum will continue. 200 week MA is very crucial currently. It is now hovering around 3150 level and this level much hold in order for STI to revert back to uptrend movement over time. But if this fails to hold, the next support level will be at 3110 level; with a potential to reach 3020 support level even.

 

In conclusion, the Straits Times Index can continue to face bearish pressure this week. But the odds of rebound will be heightening as multiple support levels will be holding STI up. Key support level will be at 3150 where 200 week MA line resides. Breaking this support level can lead to stronger selling pressure towards 3110 or even 3020 support level. However, as STI is currently holding at 3190 support level, we must watch out for a potential rebound for higher low formation here. If STI is able to open higher and close higher than the opening, bullish reversal pattern can occur. Currently, it is unlikely to go beyond 3270 resistance level.

 

What to watch out for this week:

  1. Testing of 3190 support level.
  2. Breaking of 3190 support level.
  3. Breaking of 3150 support level.
  4. Testing of 3270 resistance 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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