STI likely to retrace. Uptrend showing slight weakness.

STI likely to retrace. Uptrend showing slight weakness.
STI likely to retrace. Uptrend showing slight weakness.

STI’s raging bull continued to charge last week but its charging strength stopped last Friday after hitting major resistance of 3030 level. As the earnings season kicks in last week, STI started to experience increased intraday volatility as traders and investors were adjusting to the new earnings expectations. F&N and APB were in the limelight last week as there was a takeover battle between ThaiBev and Heineken. APB experience price spike while F&N suffered selling pressure as it might lose its control of APB’s holding. In this volatile week, STI managed to climb 19.97pts for the week and ended at 3015 level. Last Friday, DJI closed 120.79pts lower as profit taking pressure took place. Will STI be retracing this week? How low can STI go this week?  

STI’s chart will help us identify the levels and direction for this week.

Trend: Uptrend, 20ma poise up, MacD above 0

 

Support:  3000, 2950 (20ma), 2910(100ma)

 

Resistance: 3030 (Weekly high), 3070, 3130

 

Observations:

Candlestick – Short black candle with lower shadow

Histogram – Many Rs. No bearish divergence yet.

RSI – Around 69.8%. Just out of overbought. Slight bearish divergence.

Stochastic – Around 73.1%. Just out of overbought. Bearish crossover seen recently.

Bollinger Band – Between mid and upper band. Band opening up.

 

Conclusion:

STI started the week at 3000 resistance level but it managed to break it the next day. This indicates that STI will be testing 3030 major resistance level. 3030 is a major resistance level as it is the weekly chart’s high. Many traders were aiming to take profit at this major resistance level and thus, STI was unable to break this resistance level. Last Thursday, STI did manage to break 3030 resistance level by gapping up above it. But sellers were proven to be strong and caused STI to trade below it again. Last Friday’s drop have confirmed that STI is having problem breaking this major resistance level and it might start a retracement for a higher high formation. The indicators will help us identify if this retracement momentum will continue this week.

 

The mid-term indicators continue to show bullish momentum in STI’s mid-term trend. There is no clear sign of weakness yet but RSI might be starting to slight bearish divergence. Short-term indicators were showing bearish readings as STI fails to break 3030 level. Stochastic had confirmed its bearish crossover and together with bearish reading from the Histogram, STI’s selling pressure might persist for this week. This retracement could be a good movement for STI currently was both RSI and Stochastic had exited the overbought region. Hence, it is now important to determine the support level of STI so as to identify where the higher lows will be forming.

 

With expectation of retracement to happen for STI during the start of the week, STI immediate support level is now at 3000 level after last’s week’s breakout. Last Friday’s candle have shown that STI is still reluctant to test 3000 support level. Therefore, STI will likely to start the week by testing 3000 level and hold at that level. However, if the selling pressure is to be strong during the early week, STI will retrace to test the next support level of 2950. 2950 level will be a much stronger support level for STI to hold as 2950 level confluences with the 20ma support line. Therefore, 2950 will be a good level for STI to form a higher low formation.

 

Despite expectations of higher low formation at either of the support levels, STI might also have a slight chance of reversal in its trend. To confirm the trend reversal, STI must break its recent higher low of 2929 level. It might seem too late to react upon STI reaching 2929, hence, the 2950 support level can be used as a key level to determine the chances of trend reversal. If STI fails to hold at 2950 support level, it will likely to indicate that STI’s current uptrend is truly weakened and it will have a very high risk of trend reversal. Therefore, STI’s current key support level stands at 2950 level.  

 

In conclusion, STI is very likely to retrace this week. The first support level that STI will likely to test is at 3000 level. If 3000 level holds, STI’s uptrend will be intact. However, a stronger support level for STI to form a higher low formation will be at 2950 level. One should not be surprise if STI test 2950 in this coming week. 2950 support level will be a key support level for STI to determine if it can still continue its uptrend. If STI fails to hold at 2950 support level this week, it will mean that STI’s uptrend might be reversing and the downtrend confirmation level will be at 2929 level. With more earnings report to be announcing this week, STI will continue to experience high intraday volatility while the retracement is happening.

 

 

What to watch out for this week:

1)      Testing of 3000 support level

2)      Testing of 2950 support level

3)      Testing of 3030 resistance level

 

 

Trading strategy to adapt right now:

-          Long traders should wait patiently till proper support level is formed. Existing long positions should have been reduced.

-          Shortists should continue to stay sidelines as the downside might be limited.

 

 

*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.

Please consult your respective advisers.