Straits Times Index still consolidating

Straits Times Index still consolidating
Straits Times Index still consolidating

It was a short week for the Straits Times Index as the Christian celebrated the Good Friday. Bearish sentiment was also cut short as the market continued to face uncertainty over the trade war issues. Volatility was seen during the week as market participants were flicking to and fro from bullish to bearish sentiment. The opening for the week is weak but it was being reversed the next day. A low of 3382 level was being formed during the week but rebound was quick. Flickering between 3382 – 3443 levels pretty much sums up the movements for the short week. A gain of 6.58pts was clocked during the week to close STI at 3427.97 level.

Has the bearishness ended after last week’s movements? Will bullish sentiment start to dominate the market for this week?

Let’s analyse STI’s chart for further details.

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

Support: 3350 (50 week MA), 3270. 3190

Resistance: 3450 (20 week MA), 3530, 3630

Observations:

Candlestick – Short white candle. Possible Bullish counterattack pattern.

MacD – 2nd Red. No bearish divergence.

RSI – At 53%. No bearish divergence. Bouncing off RSI support.

Stochastic – At 35.8%. No crossover formed

Bollinger Band – Between mid band and lower band. Band contracting.

Conclusion:

The trading range of STI seems to be getting tighter and tighter over the weeks. With STI now trading below 20ma line, there is a risk of switching its current uptrend movement to downtrend movement. What is lacking right now is further downward movement that breaks the important support level of 3350. Last week’s movement did not bring STI to test this support level. This can mean that STI is still refusing to form a downtrend movement in its weekly chart. Consolidative movements are still in picture which leads to indecisiveness in the market. Indicators might prove some clues but it can also be misleading during consolidative period. Nevertheless, it is still necessary to look into it.

 

The mid-term indicators continued its bullish streak as MacD line continues to get lower over the period. RSI is still holding firmly at 50% support line. This is a good indication that the bullish underlying is still holding well despite the bearish market movements. Shorter-term indicators are still on the bearish side. Currently, there are no signs of reversal in the bearishness yet. Hence, the risk of further downside movement is still high in the current week.

 

With possibility of further bearishness in the short-term, it is important to look at the possible support levels that STI will be heading towards. Immediate support level stands at 3350 level. This is the key support level for STI as breaking it will indicate downtrend formation for STI. If this support level breaks, strong selling pressure should flood in. This flood can bring STI towards its next support level of 3270 or even towards a much lower support level of 3190. Going beyond 3190 support level is very unlikely for now.

 

As 3350 support level is a strong support level, it is quite unlikely for STI to break this week. Furthermore, with possible bullish reversal pattern being formed last week, STI might attempt to rebound this week. 3450 resistance level will probably prevent STI from heading higher this week. However, if this resistance level managed to break, it will mean that the bullish reversal pattern is being confirmed. Confirmation of bullish reversal pattern will allow STI to continue to trade higher and test its resistance level at 3530 level.

 

In conclusion, the Straits Times Index is still in the consolidative period despite it failing to hold at its support level at 3450. Key support level is at 3350 level as it will help to indicate whether STI will be forming downtrend formation. Underlying bullish momentum is still firm and this will likely prevent STI from moving into the bearish zone. Therefore, it is expected for STI to continue to trade in a sideway motion till a significant movement which will cause decisive movements in STI.

 

What to watch out for this week:

  1. Testing of 3350 support level.
  2. Breaking of 3350 support level.
  3. Testing of 3450 resistance level.

Trading strategy to adapt right now:

  • Long traders should stay sidelines unless clear uptrend is being formed.
  • Shortists to be prepared for crucial support level to break.

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