Straits Times Index starts to consolidate at 3180 level.

Straits Times Index starts to consolidate at 3180 level.
Straits Times Index starts to consolidate at 3180 level.

It had been a quiet week for Straits Times Index last week as there was a tussle between the buyers and sellers. The start of the week was bullish but it was lacking of sustainability. Sellers were still in the market to prevent any strong upside movement. It is obvious to see that the strength of the bull was weak as it did not sustain its high at 3248 level. On Friday, the bearish pressure took control of the market and caused STI to return nearly its whole week’s worth of gains. This resulted in a small gain of 2.5pts with thinner trading volume. STI ended at 3219.42 level.

Oil prices continue to thread on the lower side and it has been main reason for the bearishness in the market. Will it continue to pressure STI towards the lower side this week?

Let’s analyse STI’s chart.

Trend: Uptrend formation, 20 wma up, MacD above 0.

Support: 3180, 3100 (20 & 200 week MA), 2960 (50 week MA)

 Resistance: 3270, 3350, 3450

Observations:

Candlestick – Short white candle with long upper shadow.

Histogram – 2 Rs. Possible bearish crossover. Possible bearish divergence.

RSI – At 67.7%. Out of overbought.

Stochastic – At 71.2%. Overbought. Bearish crossover formed

Bollinger Band – Close to upper band. Band contracting.

Conclusion:

As discussed last week, the key support level to watch out for is at 3180 level. This support level managed to hold well despite having the risk of further downside pressure. A rebound was attempted last week and it failed to turn fruitful. This kind of price action can mean that STI is attempting to consolidate at its support before it can trigger a clear direction. Therefore, in the shorter term, there shouldn’t be many changes in price. However, to be sure, it is also important to look at the indicators for clues of direction.

 

The mid-term indicators are still on the bullish side despite lacking of strength to move last week. RSI continued to stay slightly below overbought but it did not show any attempts to head lower. MacD is now in the danger of triggering bearish signal which is something that we have to be wary of. Shorter-term indicators are on the bearish side currently. This indicates that bearish pressure will likely to continue in the market despite its attempt to rebound last week. Therefore, any upside should be capped this week.

 

Bearish expectations are to continue to happen this week. Although the immediate support level at 3180 level is holding firmly, the risk of further downside movement is still high. 3180 will remain as a key support level. Failure to hold will lead STI towards its support at 3100 level. When this happens, both Mid-term and shorter-term indicators will be showing bearish readings which can result in much deeper downside movement. Therefore, there will also be a possibility of breaking 3100 level. The next immediate support level will be at 2960 level.

 

However, we cannot rule out that the market is consolidating at 3180 support level. If the market continues to hold above 3180 level this week, it will further confirm the consolidation. With this, upside is not expected to happen this week. Any bullish movements will likely to be capped by the bearish pressure. With this, STI should not be able to go beyond its recent high resistance at around 3270 level for this week.

 

In conclusion, bearish pressure is likely to continue this week. 3180 support level will still be the key support level to watch out in the market. The tendencies for STI to consolidate at 3180 level are high currently but upside movements are unlikely to happen this week. Even if rebound happens, it will be muted and capped below 3270 level. Therefore, it will be more important to watch for a downward break of the support of 3180. Breaking this support level will shift the mid-term momentum towards the bearish side. This can lead to a retracement towards 3100 level while it can also lead STI towards 2960 support level.

 

What to watch out for this week:

1)      Testing of 3180 support level.

2)      Breaking of 3180 support level.

3)      Testing of 3100 support level.

4)      Testing of 3255 resistance level.

 

 Trading strategy to adapt right now:

-        Long traders to stay cautious.

-        Shortists to watch the outcome of bearish movement.

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