Straits Times Index faces strong sideways resistance at 3630 level.

Straits Times Index faces strong sideways resistance at 3630 level.
Straits Times Index faces strong sideways resistance at 3630 level.

Last week was a bearish week for Straits Times Index as profit pressure dominated the market during the last few days of the week. The week had a strong start but right after Wednesday, the market gapped down strongly on Thursday. This gap down action could be due to multiple index components going on Ex-Dividend. Further Ex-Dividend was seen on the next day which caused STI to close at a lower level. This “false sense” of selling pressure could have led some traders to exit the market without realising the impact of Ex-Dividend. Hence, STI was seen closing with 31.83pts lower, ending at 3545.38 level.

Has STI’s bullish momentum stopped after last week’s bearish action? Will further bearish movement happen this week?

Let’s look into STI’s chart to identify the momentum.

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

Support: 3530, 3450 (20 week MA), 3350 (50 week MA)

Resistance: 3630, 3700, 3860


Candlestick – Bearish engulfing pattern.

MacD – 4Gs. Possible bullish crossover. No bearish divergence.

RSI – At 48.5%. No bearish divergence. Slightly below RSI support.

Stochastic – At 82.2%. No Bearish crossover. Overbought.

Bollinger Band – At upper band. Band expanding.


The Straits Times Index had faced strong resistance at 3630 level last week. It failed to sustain above the year’s high of 3611 despite being able to break it during early week. Furthermore, bearish engulfing candle reversal pattern was formed. This affirms that the resistance level at 3630 level is very strong. With this kind of resistance, it can also indicate that STI may be in a sideways trend instead of uptrend; Sideways can form between 3350 – 3630 levels currently. Therefore, we should watch for this possibility for the market currently.


The mid-term indicators are largely not affected by the bearish movements last week. MacD continued to stay above the 0 level with a possible bullish crossover. RSI dipped slightly below 50% level but it is possible to happen if sideways movement happens. With this, there is a clue of possible sideways movement in STI. Shorter-term indicators are starting to look bearish. Stochastic is currently in overbought zone and is starting to head lower. Possible bearish crossover can happen if further bearish movement happened this week. Histogram is still bullish but if further bearishness happens, it will trigger bearish signal.


The resistance level at 3630 level is definitely strong. Underlying momentum can either be bullish or sideways currently. Sideways trend possibility is higher right now as RSI seems to holding firmly at 50% level. Therefore, with price near resistance level, retracement actions can be high right now. Currently, STI is trading near to its immediate support of 3530 level. This support level will be the key support level to determine whether STI will be going for a deeper retracement. Breaking this support level can lead STI towards its 20ma weekly support line at 3480 level. This is another support level which STI must hold in order to have higher chance of forming uptrend movement in the future.


If STI fails to hold at the 20ma weekly support line, it will further lower the chance of uptrend formation while increases the chance of sideway formation. Uptrend formation chance will disappear if STI fails to hold the next support level of 3450 level. Once this support level fails to hold, it will be definite that STI will be testing its sideways support level at 3350 level. Going beyond this support is definitely unlikely currently.


In conclusion, the Straits Times Index will likely to face bearish pressure this week since the resistance level at 3630 level is holding firmly. It might find support at either 3530 or 3480 level this week. If these support levels hold, it will indicate that STI will be able to start forming uptrend again. However, failure to hold at these 2 support levels will greatly reduce the chances of STI heading higher; which can lead to further downside movements towards sideways support of 3350 level.


What to watch out for this week:

  1. Testing of 3530 support level.
  2. Breaking of 3530 support level.
  3. Testing of 3480 support level.
  4. Testing of 3630 resistance level.

Trading strategy to adapt right now:

  • Long traders take cautious positions when support level at tested.
  • Shortists should stay sidelines.

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