Bullish vibe dominating the Straits Times Index

Bullish vibe dominating the Straits Times Index
Bullish vibe dominating the Straits Times Index

Bearish sentiment was reversed last week in the Straits Times Index. Fear of US-China trade war seems to have diminished over the week as the market digested the impact and possibilities. STI started the week testing the resistance level at 3450 level. There was still some bearish pressure during the day but the bulls were able to dominate the market during the day. However, it was unable to break through the resistance level on that day. The breakthrough happened on Tuesday. Buyers were seen rushing into the market to snap up oil-related counters and financials. This helped STI to sustain above 3450. This bullish momentum continued to be sustainable by these sectors throughout the week. Hence, STI managed to close with 58.8pts higher. Closing at 3501.3 level.

Clear bullish action was seen last week. Will this bullishness be sustainable? How far can STI go?

Let’s look at STI’s chart.

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

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

Resistance: 3530, 3630, 3700

Observations:

Candlestick – Long white candle. Confirmation Bullish reversal pattern.

MacD – Turned green. Bullish signal triggered. No bearish divergence.

RSI – At 50.9%. No bearish divergence. Bouncing off RSI support.

Stochastic – At 48.7%. Bullish crossover formed.

Bollinger Band – Broke mid band. Band contracting.

Conclusion:

The Straits Times Index’s movement last week had brought lots of positive vibes in the market last week. This vibe was being triggered when STI broke the key resistance level at 3450. This breakout also confirmed the bullish reversal pattern that STI formed on the previous week. These are positive signs for STI as it confirms that STI is not attempting to form downtrend channel. Instead, possibilities of sideways formation are high right now. Therefore, STI will likely to attempt to reach its recent high resistance at 3530 level.

 

The mid-term indicators continued its bullish momentum last week with affirmation of not going lower. RSI continued to hold above its 50% level while MacD refuses to head lower. Hence, the bullish underlying is still intact. Shorter-term indicators are reversing currently. Both Histogram and Stochastic triggered bullish signal. This signal means that bullishness can persist for this week.

 

With assurance of bullishness from the indicators, it is of high confidence that STI will be able to reach for its resistance at 3530 level. Testing 3530 level will be a mark to determine whether STI will be in the sideways trend. If STI is unable to go above 3530 level and starts to face bearish pressure, it will confirm that STI will be trending sideways. In sideways movements, bearish pressure at resistance level of 3530 can cause STI to return to its sideways support of 3355 level.

 

On the other hand, if STI is able to break 3530 resistance level this week, it will indicate otherwise. Possibilities of uptrend continuation will now be heightened. Breaking the recent high of 3574 level will confirm this possibility. Once there is confirmation, STI will then be able to reach out for its next resistance level of 3630 level and could even attempt to break for a higher resistance level of 3700.

 

In conclusion, the Straits Times Index might still be in a consolidative period currently. This week can be the key to determine whether STI will going in a sideways trend or form an uptrend continuation. The key resistance level will be at 3530 level. STI will likely to attempt to reach this resistance level before it can determine the kind of trend it will be trading in.

 

What to watch out for this week:

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

Trading strategy to adapt right now:

  • Long traders should stay sidelines unless clear uptrend is being formed.
  • Shortists should stay sidelines too.

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