Straits Times Index trading at critical point.

Straits Times Index trading at critical point.
Straits Times Index trading at critical point.

The Straits Times Index managed to halt its bearish movement as it managed to find its support after breaking its important support of 3270 level. The bearish sentiment only managed to push STI to as low as 3244 level before bargain hunters entered the market to scoop up bargains. However, the buyers were unable to push STI beyond 3270 level as this level seems to turn into a resistance level. Because of this, STI only managed to gain 7.58pts for the week and close at 3259.57 level.

The question now in traders head is whether the important 3270 level has turned into a resistance level. If this is so, further downside pressure might continue to occur. Therefore, we need to verify this further.

Let’s verify with these informations.

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

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

Resistance: 3355, 3450, 3530

Observations:

Candlestick – Short white doji like candle. Possible bullish harami pattern.

Histogram – 3Rs. MacD heading downwards. Bearish divergence still intact.

RSI – At 57.4%. Bearish divergence still intact. Out from Overbought.

Stochastic – At 23%. Heading towards oversold.

Bollinger Band – Testing mid band. Band contracting.

Conclusion:

Even when 3270 support level is broken, it is still clear that STI is attempting to form a higher low formation. 20 weekly MA was tested last week and this helped to prevent STI from falling deeper. Holding at 20 weekly MA line also indicates possibilities of higher low formation which can help STI to continue its uptrend movement. Furthermore, a possible bullish harami pattern was formed, which can confirm the support. But this pattern requires confirmation. The confirmation will only happen if STI is able to trade above 3270 level again. The indicators should give further clues on whether STI will be able to rebound again this week.

 

The mid-term indicators continued to be on the bullish side but the momentum is weakening. MacD is continues to head downwards while RSI is close to 50% level. It seems that RSI is holding its support level and this can lead to limited downside movement. However, the shorter-term indicators are on the bearish side currently. The indicators have yet to show any indications of reversal yet. Therefore, further bearish movement can still occur this week.

 

With these readings, we can expect STI to face further bearish pressure this week. This will also mean that the bullish harami pattern will have lesser chance of confirmation. 20 MA weekly support line will likely to be tested again. The key for this week will be whether this support line at around 2340 will be able to hold STI. If this support line fails to hold, STI will then face another round of selling pressure. If selling pressure occurs in this situation, uptrend continuation odds will be greatly lowered. Hence, this will lead STI towards its next support level at 3190. When this is the case, the trend of STI will likely to revert back to sideways trend.

 

As the bearish scenario is being covered, it is also good to look at the positive side. Despite bearish expectations, STI might have a consolidative movement at 20ma weekly support line. This means that STI will be trading in a short range between 3240 – 3270 levels for this week. Another possibility will be breaking out of 3270 level. If this happens, the bearishness of the indicators will reverse and this will also confirm the bullish harami pattern that STI had formed last week. With this confirmation, higher low formation will also be formed and this will break STI towards its next resistance level at 3355.

 

In conclusion, the Straits Times Index might be facing bearish pressure this week but the key support by the 20 weekly MA line might hold well. If it is able to hold, the underlying bullish momentum can continue towards 3355 resistance level. Otherwise, if this support level fails to hold, bearish momentum will set in and push STI down further. Its next support level at 3190 level will then be tested. Furthermore, its uptrend momentum will be compromised. Hence, yet again, this week will be an important week for STI.

 

What to watch out for this week:

1)      Holding above 3240 MA support level.

2)      Testing of 3270 resistance level.

3)      Breaking of 3270 resistance level.

4)      Testing of 3190 support level.

 

 Trading strategy to adapt right now:

-        Long traders can start looking for long opportunities only when there are bullish confirmations.

-        Shortists can consider on the short side if the support fails to hold.

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*Disclaimer:

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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