Brexit creating jitters in Straits Times Index | Jay Chia - Your Financial Mentor

Brexit creating jitters in Straits Times Index

Brexit creating jitters in Straits Times Index
Brexit creating jitters in Straits Times Index

US Fed meeting concluded last week and they had decided to keep the current rate. This did not impact the Straits Times Index much last week as the market is more concerned on another matter. The Brexit. Britain’s referendum on its position in EU is set to be discussing on 23 June this week. Many speculated that Britain’s exit will have a great impact on the whole economic situation as the Euro zone will be shaken greatly. This jittered the market on last Monday as the market opened with a strong gap down. There were attempts to rebound during the week but it was dominated by selling pressure. A low of 2579 level was hit last Thursday before STI had a meaning rebound on Friday. With this market concern, STI was seen losing 59.55pts for the week. It ended at 2763.42 level.

With Britain’s referendum on this coming 23 June, how will STI react? Will further bearishness occur this week?

Trend: Possible uptrend to sideways, 20 wma starting to turn up, MacD near 0 level.

Support: 2740, 2670, 2620

 Resistance: 2800 ( 20 week MA), 2900 (50 week MA), 2950, 3010

Observations:

Candlestick – Black candle with longer lower shadow.

Histogram – 1R. Bearish signal. MacD close to 0 line.

RSI – At 45.1%. 50% line broken slightly.

Stochastic – At 53.9%. Possible bearish crossover.

Bollinger Band –At mid line. Flat band.

Conclusion:

STI failed to continue its bullish movement last week. Instead, it confirms its resistance at 2900 level where 50 weekly MA line coincides. Its gap down movement had also immediately broken the immediate support level at 2800 level. Breaking of this support level means that the chances of STI forming an uptrend will be lowered. Currently, it tested its next support level at 2740 level and it seems to be holding well now. However, with upcoming Brexit concern, it is hard to anticipate whether STI will be holding on to this support level. Furthermore, it can be fruitful if bearish plan can be strategized.

 

The mid-term indicators are failing to continue its bullish readings. RSI failed to hold at its 50% level and broken slightly. MacD have yet to reach its 0 level despite its attempts to test it for the past weeks. With such mid-term indications, STI is currently struggling to find its trend. Shorter-term indicators are now switching to the bearish side due to the drastic drop in value last week. This caused the histogram to turn bearish. Stochastic nearly triggered a bearish crossover. If STI is to continue to trade lower this week, bearish signals will be confirmed and STI will likely to face further bearish pressure.

 

With STI now running the risk of turning bearish, it is important to be prepared for bearish scenario. Brexit situation will definitely be the key driver for the market this week. But what are more important are the key levels that we should watch out this week. Immediate support level at 2740 level will be the key level to watch this week. It held STI firmly last week but it might break if the Brexit situation turned to the worst. Once broken, downtrend formation might be confirmed as lower high and lower low formation will be formed. The next support level that STI will be heading towards will be either 2670 or 2620 level.

 

However, Brexit situation might be just a one-time off situation. The real impact on economies is still not certain yet. Furthermore, Britain might also weight the consequences of EU exit and decides to stay put. There will be further speculations on the outcome this week. Hence, volatility will be high this week. If 2740 support level holds well this week, it will mean that STI is refusing to confirm its downtrend movement. And this will lead to a sideway formation in STI. Consolidative movement will likely to happen at 2740 level before it starts to attempt to recover its previous support at 2800 level. Going beyond that level is unlikely to happen this week.

 

In conclusion, the Straits Times Index is getting closer to bearish confirmation after last week’s bearish movement. Brexit will definitely have a great impact on this week’s movement and volatility will definitely increase this week. The key support level at 2740 is an important level to determine the trend STI will be heading towards for the next few weeks. Breaking 2740 level will mean that STI will be heading for either 2670 or 2620 support level. Otherwise, consolidative movements should happen at around 2740 level for this week. Uptrend formation is definitely unlikely to happen for now.

 

What to watch out for this week:

1)      Testing of 2740 support level

2)      Breaking of 2740 support level

3)      Testing of 2800 resistance level

4)      Testing of 2670 support level

 Trading strategy to adapt right now:

-        Long traders should look to exit some positions.

-        Shortists are to be ready for shorting signals once breakout confirms.

 

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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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