STI – Are we at the bottom yet?

Trend: Downtrend , 20ma down, MacD below 0

 Support: 2686, 2626

 Resistance: 2726, 2776 (200ma), 2817 (Falling window 2815 – 2823)

 Observations:

Candlestick – Long black candle with longer lower shadow

Histogram –Yesterday confirmed 4g1r. No bullish divergence is seen.

RSI – around 25%, oversold. No bullish divergence is seen.

Stochastic – No Bullish crossover yet.  Around 20%, oversold.

Bollinger Band – Touched lower band.

 Conclusion:

STI had a very bad week as it downtrend continues with a lower high and was made worst with a lower low being confirmed yesterday. This price action has confirmed that STI should head lower. What is worst is that STI started to trade below 200ma which many deemed that if the Index is trading below it, it is a bear market. But the issue is how low can it go? Many people who like to know. (To me: “So what?” I prefer to find where the best levels to short are.)

Based on current STI’s trading level (2700 currently when I did this analysis), it has broken the previous low and hence there is a possibility of a lower low being formed. Lower low could be formed at the immediate support of 2686 level. But if this level fails to hold, it can seek 2626 level as support.  Looking at the indicators, most of them are still indicating that the bearish momentum is still in play, but the indicators are also stating that they have just entered oversold zone. Hence, chances of rebound are starting to get higher.

 If rebound is to be seen, it should be capped at resistance level as there are no bullish divergence signs yet. The rebound could be capped at the immediate resistance of 2726 level. If the rebound is strong, the max level the rebound could possible achieve is 2776 level as this resistance is confluence with 200ma.

Base on current situation, in order for STI to turn uptrend, a higher high must be seen, hence, if the rebound is higher than 2899 level, then we can conclude the trend is uptrend. 2899 level should be very hard to achieve based on current market condition.

 What to watch out for this week:

1)      Support for STI at 2686 level. Possible rebound from here.

2)      If support fails to hold at 2686 level, the next support will be 2626.

3)      MacD histogram and Stochastic bullish signal should be seen before a rebound is possible

4)      Rebound could be capped at 2720 level. Max 2776 level.

Trading strategy to adapt right now:

-          If there is short position, one can consider reducing short position by taking profit.

-          For those whom still have long position, it may not be wise to cut losses here. But if 2686 level fails to hold, it will be better to close the long positions.

-          For those whom want to initiate new long position, any upside might be capped and could be risky as there are no bullish signals from candlestick or indicators yet.

*Disclaimer applies