Straits Times Index to attempt to establish further uptrend movements. | Jay Chia - Your Financial Mentor

Straits Times Index to attempt to establish further uptrend movements.

Straits Times Index to attempt to establish further uptrend movements.
Straits Times Index to attempt to establish further uptrend movements.

Straits Times Index managed a bullish week last week as the market enters the quarterly earnings season. Numerous companies were reporting lowering in earnings but this did not stopped STI from heading higher. It started the week by holding firmly at 2900 support level which it managed to break last week. This gave much assurance that STI’s underlying momentum is now bullish. Hence, it attempted to test its next resistance level at 2950 level. This resistance level was seen capping STI’s upside for the week. Therefore, STI closed the week at 2940.43 level with 16.49pts up.

With more earnings to be reported this week, will STI be able to sustain its bullishness? Will profit taking actions start to happen this week?

Let’s identify whether profit taking will happen this week.

Trend: Possibility of switching to uptrend, 20 wma turning slightly up, MacD nearing 0 level.

Support: 2900, 2800 (20 week MA), 2740, 2680

 Resistance: 2950 (50 Week MA), 3020, 3080

Observations:

Candlestick – Short White Candle with upper body.

Histogram – 2 Gs. MacD closing to 0 line

RSI – At 46.1%. Facing RSI resistance.

Stochastic – At 68.8%. Nearing overbought.

Bollinger Band –Closer to upper band. Band expanding.

Conclusion:

STI had clearly confirmed its breakout of 2900 resistance level last week. With its reluctance of dropping lower than 2900 level last week, it indicates that STI is now forming a higher high formation. Coupled with a higher low formation on the previous week, it is more certain that STI is now in an uptrending mode. With this, it is likely that STI will continue to attempt to trade higher. However, with such sharp rise in prices over the last 2 weeks, there is also a likelihood of profit taking action currently. Therefore, it is important to look at the indicators to identify if this bullish strength will be sustainable for this week.

 

Mid-term indicators’ momentum is getting clearer in its reversal to bullish one. 20 weekly MA line is starting to angle itself upwards after last week’s bullish closing. MacD line is now close to the 0 level which can be an indication of reversal confirmation. Therefore, STI is indeed in the midst of trend reversal. Shorter-term indicators are now showing bullish signs. In particularly, the Stochastic as it formed a bullish crossover. This will mean that the bullish momentum will likely to be retained for this week.

 

It is possible that STI will be attempting to head higher this week as the indicators are in favour of further upside movement. However, what STI will be facing right now is a strong resistance level at 2950 level. This resistance level confluences with the 50 week MA line. Hence, it will be a tougher resistance level to break currently. If the bullish momentum is strong, it should not have a problem breaking this resistance level. Once this resistance level is broken, STI will then be heading towards its next resistance at 3020 level.

 

If this bullish possibility fails, STI will likely to face profit taking pressure. From the daily charts, it is clear that STI is in a short-term overbought mode with bearish indications. Therefore, STI will likely to start the week with a bearish start. This bearish retracement will likely to help STI to setup for further upside movement. The first support level that STI will likely to test is at its gap support between 2917 – 2928 levels. This support level will likely to hold as STI’s underlying bullish strength is still intact. Even if it fails to hold, the strong support level at 2900 level will prevent STI from dropping further.

 

In conclusion, the Straits Times Index might start off the week with some profit taking action which will likely to push it towards its gap support between 2917 - 2928 levels. Even if this support level fails to hold, STI will likely to be supported at a strong support level at 2900 level. After this support level is being confirmed, STI will then attempt to head towards 2950 resistance level. 2950 resistance level is a strong resistance level which STI might take time to break it. Hence, going beyond 2950 resistance level is unlikely to happen for this week.

 

What to watch out for this week:

1)      Testing of 2917 – 2928 gap support level

2)      Testing of 2900 support level

3)      Testing of 2950 resistance level

 Trading strategy to adapt right now:

-          Long traders should consider to buy when there is bullish reversal at support level

-          Shortists should stay cautious

 

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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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