Monday Technical Analysis – March 30th 2009

Let’s take a look at the charts ,and see if the reversal is a reversal, or a possible retracement.

The data for STI is not out yet but I believe it has gap covered its support. The exhaustion gap is frequently covered within a short period of time as I mentioned. The second gap is known as a runaway gap and is typically covered too.  The STI, like the DJIA is extremely overbought. MFI is over 80% which is rare for indices and is even rarer during a bear market. The odds are definitely on a downside for some gap covering. We know it will head back down, question is where will it go? My calculations show, a possible support at 61.8 retracement, for a higher low. That will be… ta da! 1580 now. It could find support at 50% which is 1615 region, so we have to see where it intends to head to. Go short now? You must remember to weigh your risk and reward. Your risk is a break of 1780. It doesn’t look rewarding. If you have to trade, do quick trades and lock in profits fast. I do expect volatility during this period.  A higher low tends to be bullish but that’s not the end of the story. From a trading point of view, the point to go long is when the ultimate resistance is broken. 200MA will of course have to break first. The ultimate resistance for STI is around is first at 1950 and then 2150. If these can break, the market will no longer be suited for shorting as it has turned bullish. What we have seen is NOT a bullish move. It is a bottom that is trying to form. Will this bottom break, is anyone’s guess. What I will be doing is to lock in profits as it heads down. Got burnt once, never again. Lock it in, wait for rebound and await short signals. If you look at the weekly chart for the STI you actually see a prolonged base forming already. The top-bottom can be a lot but the overall picture is SIDEWAY.

I went into SGX today at 2 entry points for a short position. MACD short signals, plus bearish candlestick formation was in the works. I was worried bout a whipsaw but it ended pretty ok. 4.70 is the level to look out for. If that somehow cracks, watch for gap covering till 4.22.

Same story on the DJIA.. very overbought. First support 7280 which.. may hold. So let’s see.  I am not as interested in the DJIA as I do not trade in those markets in the US.

I like UOB but the risk reward was not good enough to enter more positions in. I am looking at a support at $9. If that breaks, I will assess again.

Back to the STI, I am not expecting Wave 3 to commence so soon. Maybe another 1 or 2 weeks but I could be wrong. What we have seen on Fri and Monday is a fierce profit taking session going on while bears join in the fun to go short. What I do anticipate is a volatility that will kill both bulls and bears where everyone losses money. If the market does turn out volatile, either stay away, or do very short term trading and take profits fast. Don’t long or short and just hold.