STI – A Review on its current direction

Trend: Uptrend, 20ma up, MacD above 0

Support: 2840 (50 & 100ma), 2808 (20ma & 200ma close), 2740

Resistance: 2890, 2925, 2960

Observations:
Candlestick – Long white candle (breakout)
Histogram –4g1r failed, now 1G. No bearish divergence is seen.
RSI – Overbought. No bearish divergence is seen.
Stochastic – Starting to form bullish cross. Close to Overbought.
Bollinger Band – At upper band. Band expanding.

Conclusion:
STI has a strong surge yesterday as China announced over the weekend that it is going to allow it yuan currency to float. It was something quite unexpected; Unexpected in the sense that why it would turn out to be a bullish news. I am still quite puzzled by it. Nevertheless, it is good to expect the unexpected in the market, just like how people have been discussing during the world cup season; “The ball is round. Anything can happen.”
STI’s movement last week has already confirmed it uptrend movement with a formation of higher high and higher low. Going forward, there is a probability of a higher high being formed. This higher high as at first expected to be formed at 50 & 100ma as resistance, but yesterday’s movement broke the resistance level of 2840 level. Hence, the next possible level for a higher high to be formed could be at 2890 level or 2925 level. 2890 level could be a better resistance level as it has confluence of 2 points.
If STI gets resisted there, the retracement could be support by 2840 or 2800 level. These 2 levels could be a good level to initiate a long position for the continuation of uptrend.
Looking at the indicators, they are generally bullish and could be overbought currently. Hence, the probability of retracement is getting higher instead of expecting a breakout.
What to watch out for this week:
1) Resistance of 2890 level, if it happens, watch for support at 2840 or 2800 level.
2) Breakout of 2890 resistance.

Trading strategy to adapt right now:
- Wait for a higher low formation at 2840 or 2800 level.
- Adopt breakout play if 2890 breaks.

*Disclaimer applies