Straits Times Index broke key resistance level.

Straits Times Index broke key resistance level.
Straits Times Index broke key resistance level.

Straits Times Index enjoyed a strong start for the month of October as buyer confidence started to build up strongly. Many have seen positive signs in Singapore economic situation, leading to gain in confidence in the market.  More confidence were driven by strong market numbers from US side as the US market hit new historical highs. Reports of un-sustainability of the US rally were shrugged off aside as fresh numbers were supporting the strength of US economy. Thus, these factors drive STI towards breaking its resistance level at 3270 level. Breaking the 2 month old sideways movement will likely to draw traders into the market currently as it signals the end of the downward retracement in the market. With this, STI is seen closing the week at 3291.29 level with 71.38pts up for the week. Strongest weekly gain made for the year.

Can this bullish momentum carry on for the week? If it is so, how far will STI to able to rally towards?

Let’s look at the chart to determine the levels.

Trend: Uptrend formation looking compromised, 20 wma flatten, MacD above 0.

Support: 3270 (20 week MA), 3190, 3100 (50 & 200 week MA)

Resistance: 3355, 3450, 3530

Observations:

Candlestick – Long white candle.

Histogram – Turned Green. Bullish signal triggered. MacD staying above 0. Bearish divergence still intact.

RSI – At 59%. Bearish divergence still intact. Bounce off 50% line confirmed.

Stochastic – At 51.9%. Bullish crossover confirmed.

Bollinger Band – Broke mid band. Band contracting.

Conclusion:

At last, the mind daunting months of sideways movement to risk of deeper correctional movement had been ended by strong bullish movement last week. The breakout of 3245 minor resistance level has already set a bullish tone for the week. Further bullish sentiment seep on Friday had brought further optimists to the market which broke the important resistance level at 3270 level. It is definitely a surprise to me as I am not expecting the breakout to happen in such a fast fashion. However, this surprise should not stop us from positioning ourselves in the market. Similar confidence in the market should be tapped into in order for us to be able to ride on the newly minted upward trend.

 

The mid-term indicators’ momentum started to reverse after last week’s movement. RSI has confirmed its rebound from the 50% line and this has assured that the underlying bullish momentum is still intact. MacD is also showing its refusal to head towards its 0 level. However, the bearish divergence signal is still intact. Shorter-term indicators are showing positive signs currently. Histogram had triggered a bullish signal while Stochastic had confirmed its bullish crossover. Being out of the oversold zone, STI will likely to continue its bullish momentum currently.

 

With the indicators poising for the bullish side, it is unlikely for STI to face strong bearish pressure in this coming week. Therefore, we should be seeking the ideal resistance level for STI to reach. Immediate resistance level that STI will face currently stands at 3355 level. 3355 level is created by the previous high in the recent uptrend formation. Testing this resistance level indicates that STI is attempting to create a new uptrend formation. As for now, it seems to be unlikely for STI to be able to go beyond this level and reach for its next resistance at 3450 level.

 

As some might be less incline to chase a breakout movement in the market, it will be a good practice to wait for a proper retracement before entering positions. Hence, if there are any profit taking situations in the market, it can be a good opportunity to establish positions. The first support that STI will be testing for a good support will be the breakout level of 3270 level. If this support level fails to hold, STI might be heading towards its 20 week MA line at around 3255 level. Regardless of which support level that it is testing, STI might be attempting to form a firm support before heading higher.

 

In conclusion, the Straits Times Index is now in a good setup for further upside movement. If bullishness is to continue this week, STI will be testing its resistance at 3355 level. Breaking beyond 3355 level is unlikely currently but if it does, 3450 level will be in sight. However, profit taking pressure can also happen during the week. Support level of 3270 level should hold well. If STI is unable to hold firmly at this support level, the next better support level will be at 3255 level. Either way, testing and holding above these support level will be a good level to position for further upward movements.

 

What to watch out for this week:

1)      Testing of 3355 resistance level.

2)      Testing of 3270 support level.

3)      Testing of 3255 support level.

 Trading strategy to adapt right now:

-        Long traders can position for long trades.

-        Shortists should avoid having short trades.

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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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