Straits Times Index establishing itself for month of June | Jay Chia - Your Financial Mentor

Straits Times Index establishing itself for month of June

Straits Times Index establishing itself for month of June
Straits Times Index establishing itself for month of June

Straits Times Index continues to rebound last week as the market response in tandem with the rebound in Oil prices. Offshores and oil related counters continued to be the main contributor of the bullishness in the market. However, high volatility continues to be seen in the market as market participants start to be concern on US interest rate hike in the upcoming month of June. Stronger hints of interest rate hike in June are heard last week. Hence, many chose to stay cautious by staying out of the market. This explains the low trading volume last week. Despite these concerns, STI is still able to gain bullish strength at the end of the week; helping STI to be able to test its resistance level at 2800 level. STI gained 38.69pts during the week, closing at 2802.51 level.

Month of May is coming to an end soon while many are anticipating interest rate hikes in month of June. How should we prepare ourselves for the upcoming month?

Trend: Possible downtrend to sideways, 20 wma flattening, MacD near 0 level.

Support: 2740 (20 week MA), 2670, 2620, 2530

 Resistance: 2800, 2900, 2950

Observations:

Candlestick – White candle.

Histogram – 1G. MacD close to 0 line

RSI – At 59.2%. Slightly above 50% line.

Stochastic – At 23.1%. Oversold. Bullish Crossover.

Bollinger Band –At mid line. Flat band.

Conclusion:

The continuation of rebound last week had helped to bring some bullish confidence back into the market. However, the last of trading volume for this rebound is somewhat unconvincing to many. There is still lack of strong conviction in the market currently. Furthermore, with STI facing the resistance at 2800 level, it will likely to draw more to think into possibilities of selling pressure into the market. We cannot be sure of what is likely to happen until selling pressure starts to set into the market. Therefore, this week can be a key week to determine the direction for the month of June. Indicators should be able to give us clearer clues based on last week’s movement.

 

Despite a bullish closing last week, it did not have much impact on the mid-term indicators. Their readings remain pretty flat and were unable to give any clear directions. The risk of downtrend movement is still there but it needed further confirmations. Shorter-term indicators are much clearer after last week’s rebound. They have started to trigger bullish signal which indicates that the rebound can be sustainable. Coupled with oversold in Stochastic, there is a much higher chance for STI to continue its rebound this week.

 

Hence, with bullish readings from the shorter-term indicators, possibilities of a bullish continuation are higher. This will also mean that STI will be attempting to break its immediate resistance at 2800 level. Once it is able to stay above this resistance level, it will then be able to seek its next resistance at 2900 level. However, for this scenario to be more achievable, trading volume must set in. Therefore, another key consideration for this rebound to happen is to have stronger market participation.

 

If trading volume fails to kick in, the rebound will unlikely to be sustainable during the week. 2800 resistance level will then be holding firmly. If this resistance level holds, it will mean that STI will be running a risk of forming lower high. Lower high formation can lead to confirmation in downtrend formation. If this happens, STI will then experience further selling pressure that will eventually break 2740 support level. Being said that, this does not mean STI will not turn out to be sideways. There is still a possibility that it will happen.

 

In conclusion, the Straits Times Index is now at a key turning point right now. It can either revert to uptrend or start a new downtrend. Otherwise, it will just remain sideways. With indication from the indicators that STI will be able to continue its rebound, it must first break the resistance at 2800 level. This breakout must come with conviction of high trading volume. If trading volume sets in, STI will then be able to reach its next resistance level of 2900. However, STI is still running the risk of downtrend formation. If it fails to break 2800 level and sustain, it will mean that selling pressure will set in to push STI towards 2740 level. Once 2740 level breaks, downtrend will be confirmed and this will lead to further downside movement. Therefore, we must be prudent to react during this week.

 

What to watch out for this week:

1)      Testing of 2800 resistance level

2)      Breaking of 2800 resistance level

3)      Testing of 2740 support level

4)      Breaking of 2740 support level

 Trading strategy to adapt right now:

-          Long traders should be cautious at this stage.

-          Shortists are to watch for clear bearish signs.

 

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