Strait Times Index to continue on its upside despite concerns.

Strait Times Index to continue on its upside despite concerns.
Strait Times Index to continue on its upside despite concerns.

Despite the short week, Straits Times Index was seen rising towards the upside last week. The week started with weak bullish sentiment as the market was scooping for reasons to trade higher. There were profit taking pressure during the early week but buyers were able to sustain the rally. Further bullishness was seen after the Vesak day holiday as more positive sentiment were gained from the regional market. This lifted STI to as high as 3274 level before easing off on Friday. Overall, the profit taking pressure during the week did not manage to press the market down but instead, buyers were eager to sustain the market. Hence STI closed at 3255.29 level with 25.56 pts up for the week.

Currently, many start to wonder how far STI can go. Talks of falling oil prices are starting to impact the prices of offshore & marine sector. How will the market react this week?

Let’s derive some answers from the chart.

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

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

 Resistance: 3250, 3350, 3450

Observations:

Candlestick – White spinning top.

Histogram – 2 Gs. Bearish crossover failed to happen.

RSI – At 81.3%. Overbought.

Stochastic – At 87.2%. Overbought. No bearish crossover yet.

Bollinger Band – Close to upper band. Band expanding.

Conclusion:

Last week’s price action seems to be a continuation of previous week’s bullish movements. These have helped the Straits Times Index to react its next resistance level of 3255 level. It is natural to see some profit taking pressure at resistance level. Hence, there is no surprise when selling pressure actions are seen last week. Existence of selling pressure does not mean that the bullishness of STI will start to wilt off. Instead, based on the candle last week, it seems that there might be strength for STI to attempt to break this resistance level. Further confirmations are needed before I can conclude the break out of the resistance level.

 

The mid-term indicators are on the bullish side currently. Although RSI seems to be trending on the overbought region, it seems that the bullish momentum is likely to continue. Hence, there is no sign of bearishness currently. As for the shorter-term indicators, it is obvious that they are trending on the bullish side. Bullish confirmation is also seen and hence, the short-term bullish momentum is likely to sustain instead of facing resistance pressure.

 

Therefore, it is very likely for STI to go beyond 3255 level this week. With STI going beyond 3255 level, the next resistance level that STI will be seeking is at 3355 level. It is a 100 points upside which STI might take a while for the resistance level to reach. With every upside, there will be moments where profit takers will start to dominate the market. However, based on the momentum, buyers will likely to neutralise this selling pressure and push STI towards the resistance of 3355 level.

 

Although bearish movements are unlikely to happen this week, it is still better to be prepared of unseen circumstances. Furthermore, STI is now trading at the resistance level at 3255 level. If this resistance level holds this week, it will mean that the bullish momentum is not strong enough. Profit taking pressure will push STI back to its breakout level of 3180. Going beyond 3180 level is unlikely currently as this support level will be a very strong foundation for further uptrend movement.

 

In conclusion, the Straits Times Index is now cleared to head higher despite its struggles to rise higher last week. Profit taking actions last week are not of a major concern as resistance level at 3255 level is hold. Breaking out of 3255 level is likely to happen this week as the underlying bullish strength is seen to be strong. Therefore, STI will likely to head towards the next resistance level of 3355 level. STI’s attempt to head higher is unlikely to happen quickly. Downside is not expected to go beyond 3180 level currently.

 

What to watch out for this week:

1)      Testing of 3255 resistance level.

2)      Breaking of 3255 resistance level.

3)      Testing of 3180 support level.

4)      Testing of 3355 resistance level.

 

 Trading strategy to adapt right now:

-        Long traders hold on to their long positions.

-        Shortists stay out of the market.

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*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.

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