Straits Times Index broke out of key resistance of 3270

Straits Times Index broke out of key resistance of 3270
Straits Times Index broke out of key resistance of 3270

At last, the Straits Time Index managed to secure a more sustainable bullish movement after months of sideways movement. The key catalyst for the bullish movements was triggered by Yellen’s comment on US economy and the potential of future interest rate hikes. This drew positive sentiments in the market. This strong bullish movement only came about on Thursday, right after the speech by Yellen on Wednesday night. In the early week, market participants were cautious and were seen exiting the market; reaching a low of 3196 level. This selling pressure was being countered by strong movements on Friday. This strong movement broke STI’s sideway’s high of 3275 level. Hence, breaking out of the sideways range, leading to close at 3287.43 level with 58.42pts up for the week.

The main question now will be whether this breakout will be sustainable. Some are worried of a whipsaw action. So will STI’s breakout turn sustainable?

Let’s look for the answer from the charts.

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

Support: 3270, 3190 (20 week MA), 3100 (200 week MA)

Resistance: 3350, 3450, 3530

Observations:

Candlestick – White candle with long lower shadow.

Histogram – Turned G. Bullish signal triggered. Bearish divergence.

RSI – At 59.1%. Heading towards 50%.

Stochastic – At 65.7%. Bullish crossover confirmed.

Bollinger Band – Testing upper band. Band starting to expand.

Conclusion:

Breaking 3270 resistance level definitely brings cheers to chartist as STI now has a more decisive direction. This breakout comes with strong trading volume which made this breakout more convincing. This means that it is more likely that STI will not revert back to its sideways movement and will now be continuing its previous uptrend movement. However, it is better to confirm this with the readings from the indicators.

 

The mid-term indicators start to revert back to the bullish side currently. MacD line did not fall further and instead attempting to head upwards. RSI managed to bounce off higher and seems gaining upward momentum. However, bearish divergence readings continue to stay. Shorter-term indicators are turning bullish. Histogram triggered a bullish signal while Stochastic confirmed its bullish crossover. This further support the sustainability of the breakout.

 

With bullish confirmation from the indicator readings, it is very likely that STI will continue its uptrend movement after a sideways consolidation period. This means STI will attempt to trade higher this week. The resistance level that it will likely to approach is at 3355 level. Testing this resistance level will further confirm the continuation of uptrend movement. If the bullish momentum is strong, STI might even attempt to reach the next resistance at 3450 level. Reaching the next resistance level will require further confidence from the market participants.

 

Although the indications are towards the bullish side, it is also important to be prepared for surprises. When STI fails to sustain its breakout, it will mean that STI is retreating back to its breakout level of 3270 level. Getting below 3270 level will lead STI back to its sideways support level at 3190 level. This will also mean that STI will be reverting back to its sideways movement; thus, invalidated the uptrend continuation.

 

In conclusion, the Straits Time Index had reversed the odds of bearishness to bullish sentiment. Breaking out of 3270 has definitely indicated continuation of uptrend movement. In order to sustain the break out, STI must hold above 3270 level this week. If the bullish momentum is sustainable, STI will likely to test its immediate resistance level at 3355 before it can attempt to reach 3450 level. Therefore, do expect the market to have further bullish attempts this week.

 

What to watch out for this week:

1)      Holding above 3270 support level.

2)      Testing of 3355 resistance level.

3)      Breaking of 3270 support level.

 

 Trading strategy to adapt right now:

-        Long traders can start looking for long opportunities.

-        Shortists should avoid 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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