Straits Times Index will likely to rebound.

Straits Times Index will likely to rebound.
Straits Times Index will likely to rebound.

The Straits Times Index faced a volatile week last week as market participants were fighting to decide a market direction. The week first started with strong selling pressure which broke the support at 3450 level slightly. Instead of sliding lower the next day, STI opened with a gap up on the next day. This brought STI back above 3450 level. Talks of US tariffs continue to affect the market and brought STI back to test 3450 level again. However, this support level held well as buyers rushed to support the level. This volatile movements in the market have helped STI to recover 6.37pts; ending at 3485.57 level.

Support at 3450 level seems to be holding strongly. Will STI be rebounding from this support level and start to form a new uptrend formation?

Let’s analysis STI’s chart for the clues.

Trend: Possible sideways to uptrend, 20 wma still up, MacD above 0.

Support: 3450 (20 week MA), 3350 (50 week MA), 3270

Resistance: 3530, 3630, 3700


Candlestick – Black hammer like candle.

MacD – Still Red. No bearish divergence.

RSI – At 52.8%. No bearish divergence. Back to RSI support.

Stochastic – At 62.8%. Bullish crossover confirmed.

Bollinger Band – At mid band. Band contracting.


Straits Times Index managed to test the support level at 3450 level last week. This support level is being supported by the 20 week MA line too. Hence, it became a tougher support level to break. Hammer like candle also appeared which indicates that the support level is holding well. Therefore, it is conclusive to say that this support level is strong. With this strong support level holding, it will be hard for STI to confirm its lower high formation which can lead STI to form downtrend in its weekly chart. Therefore, there is a possibility for STI to revert back to its underlying bullish trend. More affirmation can come from the indicators.


The mid-term indicators are holding well last week as they are not showing strong bearish indication. RSI is holding firmly at its support line while MacD did not seems to be heading lower. Therefore, the bullish momentum is holding well. Shorter-term indicators continued to show conflicting readings. Histogram remains bearish while Stochastic continued to head higher. Mix readings can be an indication of sideways momentum.


The indicators are also not giving very definite directions at this point in time. Since STI is trading at a strong support level right now and together with underlying bullish momentum readings, we should be expecting rebound movements to happen. If rebound actions are to happen this week, STI will first face the resistance at 3530 level which it is unable to break for the past few weeks. Further bullish confirmation can only happen when STI is able to break 3530 resistance level. Breaking this resistance level will then lead STI towards its recent high of 3611 level.


However, if bullish rebound fails to appear, it will indicate that bearish momentum is still intact. This can mean that STI will be testing 3450 support level again. It might take a while for STI to break this strong support level. But if it breaks, it will give a clear indication that STI’s underlying bullish momentum will fail to hold. Change in underlying bullish momentum can lead to strong selling pressure which can push STI to its next support at 3355 level and beyond. If this happens, we should know how to react to it.


In conclusion, the Straits Times Index continues to sit on the fence currently. However, chance of rebound action is more likely to happen this week. Upside can be capped by resistance at 3530 level. But if it breaks this resistance level, it can only mean that STI will be reverting back to its bullish momentum for the weeks to come. Therefore, it is important to watch out for this resistance level this week. Otherwise, another key level to watch for will be the support level of 3450.


What to watch out for this week:

  1. Testing of 3450 support level.
  2. Breaking of 3450 support level.
  3. Testing of 3530 resistance level.
  4. Testing of 3355 support level.

Trading strategy to adapt right now:

  • Long traders should stay sidelines unless clear uptrend is being formed.
  • Shortists can take short positions if there is bearish confirmation.

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