Straits Times Index coming to next key resistance level at 2950 level. | Jay Chia - Your Financial Mentor

Straits Times Index coming to next key resistance level at 2950 level.

Straits Times Index coming to next key resistance level at 2950 level.
Straits Times Index coming to next key resistance level at 2950 level.

Straits Times Index turned out to be a pretty exciting last week. The week started with a break out action which broke the tough resistance at 2860 level. Breaking out of this resistance level indicates that STI is attempting to form an uptrend momentum. It succeeded in maintaining the break out on Tuesday by heading higher. There isn’t any bearish news that prevented the market from going higher; with exception of an abrupt trading halt on Thursday last morning. More than half of day was closed for trading as SGX’s trading system faced technical problem. However, this did not stop the market from going higher the next day. STI closed the week with 78.31pts higher and ends at 2925.35 level.

Stream of positive news are heard over the week. In the upcoming week, more companies are releasing their earnings report. Will it affect STI’s bullishness? Let us evaluate how much change had last week made to STI’s chart.

Trend: Possible sideways to skewing towards uptrend, 20 wma point upward, MacD slightly below 0 level.

Support: 2860 (50 week MA), 2800 (20 week MA), 2730

 Resistance: 2950, 3010, 3090 (100 week MA)

Observations:

Candlestick – Long white candle.

Histogram – 3G. MacD close to 0 line

RSI – At 58.2%. Above 50% line.

Stochastic – At 84.9%. Just entered overbought.

Bollinger Band –Close to upper band. Band squeezing.

Conclusion:

2860 resistance level is a strong resistance level that it refused to break for the previous 2 weeks. Confluence with the 50 week MA line made it stronger. Being able to break out from this strong resistance level indicates that the market is confident of further upside. With this, it is clear that STI is attempting to switch its momentum to the bullish side. However, the main question now is how sustainable is this break out action. Will uptrend be forming after this break out action? Hence, we have to explore through the indicators to confirm the bullish strength.

 

The mid-term indicators are now starting to show clearer bullish signs. MacD line is now near the 0 level but it requires more bullish movements before it can confirm the reversal to bullish momentum. RSI is now above the 50% and it will mean a possible change in mid-term momentum. The shorter-term indicators continued to stay bullish. This momentum will likely to continue for this week as there are not clear signs of reversal yet. However, Stochastic is now at overbought zone and the price is now near to the upper Bollinger band. This means that STI is getting more overbought but it does not imply that STI will be retracing for this week.

 

With understanding that the bullish momentum will be sustain this week, we can safely identify that STI will still be seeking for its resistance level. Immediate resistance level that STI will be facing is at 2950 level. 2950 level is the recent high that was form early this year. This high will be an important confirmation level to determine whether STI is forming an uptrend formation in the weekly chart. Failure to break this resistance level will indicate that STI might be forming a sideways trend. Sideways possibilities can be high right now as STI seems to have formed 2 of the same lows at 2730 level. Hence, it is important to look at how market will behave when it test 2950 resistance level. With overbought readings, it is possible that STI will be facing retracement action at this resistance level.

 

However, if STI managed to break this resistance level at 2950 level, it will mean that STI is forming uptrend. Uptrend formation is a positive sign for the upcoming weeks. Breaking out of this resistance level will likely to lead STI to further bullish movements. These bullish movements can lead STI to test its next resistance level at 3010 or it can even reach as high as 3090 level where 100 week MA coincides. Of course, to reach this resistance level, STI might take some time to get there.

 

In conclusion, the Straits Times Index is now gaining bullish momentum which might lead towards 2950 resistance level for this week. 2950 resistance level is another key resistance level to watch out this week. Breaking this resistance level will confirm that STI is forming a weekly uptrend formation. This formation can help STI to reach as high as 3090 level. However, as the shorter-term indicators are showing overbought signs, there are chances of retracement actions. 2950 resistance level might hold and triggers profit taking action. If this happens, there is also a possibility that STI will be forming sideways trend which can lead STI to test its support at 2730 level. Therefore, this week will be a crucial week for STI.

 

What to watch out for this week:

1)      Testing of 2950 resistance level

2)      Breaking of 2950 resistance level

3)      Testing of 2860 support level

 

 Trading strategy to adapt right now:

-        Long traders can consider cautious positions when breakout happens.

-        Shortists should only be involved when profit taking actions happens.

 

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*Disclaimer:

This analysis is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to purchase or sell the product mentioned. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks.

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