Straits Times Index to remain bullish till resistance level.

Straits Times Index to remain bullish till resistance level.
Straits Times Index to remain bullish till resistance level.

New high was form for the year as Straits Times Index continues its bullish run last week. The week started flat on Monday as market participants were consolidating for more reasons to buy in the market. On Tuesday, the market rushed higher as earnings reports from various companies brought confidence back into the market. This helped STI to reach as high as 3429.11pts during the week. These positive actions are clear indication that the market is still in a strong bullish trend. However, resistance level at 3450 level is yet to be tested as slightly profit taking action as seen on Friday. STI ended the week at 3420.10 level with 37.79pts up for the week.

Will profit taking sentiment start to seep in before STI reaches its resistance at 3450 level? How so we prepare ourselves during this period?

Let’s look at the current state of STI’s chart.

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

Support: 3355, 3270 (20 week MA), 3190, 3100 (50 & 200 week MA)

Resistance: 3450, 3530, 3630

Observations:

Candlestick – Long white candle with upper and lower shadow.

Histogram – Many Gs. MacD crossover confirmed. Bearish divergence failed.

RSI – At 62.1%. Bearish divergence failed. Staying above 50% line.

Stochastic – At 95%. Overbought. Possible bearish crossover.

Bollinger Band – Testing upper band. Band expanding.

Conclusion:

Uptrend movement have continued last week after consolidating well during the previous week. Market action last week further reassures that the bullish momentum is strong and will likely to lift STI to a much higher level. Resistance level at 3450 is now not beyond reached currently as it is getting closer. What is really crucial now is whether STI’s bullish momentum will be sustainable. Therefore, it is important to use indicators to determine the possibilities.

 

The mid-term indicators’ are not losing its bullish momentum as they offers more upside bullishness. RSI have yet to enter the overbought region and this will mean that there are still upside possibilities. Furthermore, MacD has clearly confirmed its bullish crossover which indicates that the bullish momentum will sustain for a longer run. Shorter-term indicators are also staying on the bullish side currently. However, Stochastic is now in overbought region and it has been staying in this region for quite some time. Together with the price hovering at the upper line of Bollinger band, it is clear that the market is in a short-term overboard.

 

From the indicators, the risk of short-term retracement is there but it will unlikely to happen for now as the market has yet to reach a key resistance level. 3450 resistance level will be the resistance level to watch out currently as retracement actions will likely to start when this resistance level is being tested. Therefore, STI will continue to make bullish attempts this week in order to reach its resistance level at 3450 level.

 

But if this expectation fails, it will mean that the profit takers had dominated the market and form new resistance levels. However, downside should be limited for now as the underlying trend is bullish. Immediate support level stands at 3355 level which has been supporting the market well during recent weeks. Therefore, STI will unlikely to be trading lower than 3355 level this week. Of course, if all else fails, it will indicate the next strongest support level will be at 3355 level.

 

In conclusion, the Straits Times Index is expected to continue its bullish streak this week. As the market is getting more and more overbought, upside will likely to get more and more limited currently. Immediate resistance continues to be at 3450 level which will be capping STI’s upside. Hence, going beyond 3450 level is unlikely for now. Immediate support stands at 3355 level. This support level will likely to hold firm for now. But if profit taking pressure is too strong, 3270 support level should prevent STI from going lower.

 

What to watch out for this week:

1)      Testing of 3450 resistance level.

2)      Testing of 3355 support level.

3)      Breaking of 3255 support level.

 Trading strategy to adapt right now:

-        Long traders can start looking towards partial profit taking at resistance level.

-        Shortists should avoid having short trades.

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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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