*Disclaimer: This material 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. If there are any questions, please contact me (Jay)

 

Yet again, STI failed to rebound after its attempt during last Friday’s trading session. STI was able to head towards 2910 resistance level after it opened slightly higher yesterday. However, selling pressure started to enter the market after HSI opened negatively causing STI to head back to 2880 support level again. After lunchtime, STI started to break 2880 support level after reports of Greeks might quit the European Union. This lead to more fears in the market and causing the European market to open with a deep gap down during its opening. STI eventually close at 2864 level which is 19.28pts lower. Last night, DJI ended 125.25pts lower after the fear of European situation worsening. Will STI continue to go lower today? What is the new support level for STI currently?

STI closed with a long black candle yesterday despite it having a gap up opening. This candle can be seen as a downward continuation pattern and this candle has also confirmed that 2880 support level has been broken. Hence, STI might be heading for its next support level. The short-term indicators continued their bearish momentum and Stochastic failed to trigger a bullish crossover after the market failed to rebound yesterday. Oversold continued to be seen in the indicators till a proper reversal candle is seen. The next support level for STI stands at 2850 level. This support level confluence with 200ma support line and it could be a strong level to stop STI’s further decend.

The banks were affected by the report from the European side and drastically reversed their earlier bullish movement and ended up lower. They reversed the gains achieve last week and most of them tested the 20ma line again. Uob’s 20ma support line failed to hold Uob but Uob ended up at 50ma support level. For the past month, Uob has been holding well at 50ma support line and it will likely be happening again. The offshores were trading mixed yesterday as they were not moving in tandem yesterday. Sembcorp enjoyed a rebound and attempted to trade above its 100ma resistance line again. Kepcorp, on the other hand, slide further and is seeking support around 10.04 level.

Most of the properties ended lower yesterday and most of them failed their attempt to rebound off their support levels. Capitaland and Kepland did not managed to confirm their bullish signals and ended up lower yesterday. F&N tested its 50ma support line again and one will not be too sure whether this support level will hold. The commodities ended decisively lower yesterday as they continued to be lacking of catalyst to rebound. As the commodities are in extended downward movement, their indicators were constantly oversold. If there were any confirmation of bullish reversal, rebound for the commodities should be a significant one.

In conclusion, selling pressure is likely to continue today as there is lack of signs of reversal. Numerous sectors like Commodities and Offshores were attempting to find their support while sectors like Banking and Properties might hold well at their support levels. Hence, STI is likely to head towards its next support level of 2850 level before it can prepare itself for a proper rebound. Downside continues to be limited as the indicators were showing oversold situation and rebound can happen soon.

 

Long traders should continue to wait for proper support confirmation before entering counter trend long positions. Shortist should avoid adding short positions as the downside is limited.

STI failed to hold at 2950 sideways support last week after a dramatic change in political powers in the Europe last week. Participants’ fear of further European issues caused markets in the world to collapse within a day. STI suffered 65pts down on Monday, clocking one of deepest drop this year. The bearish sentiment was so strong that it broke 100ma support line at 2910 during the mid of the week. Last Friday, STI reached as low as 2874 level before it closed at 2883 level, the main catalyst of selling pressure is due to the announcement of JP Morgan’s weak results. Market’s confidence is shaken once again and people are poised for the bearish side. STI ended the week with 107.19pts lower. Last Friday, DJI reacted to the JP Morgan’s results and closed 34.44pts lower. Will STI be able to form a support level and rebound this week? Where are the support levels for STI currently?
Let’s find out from the charts.

Trend: Downtrend, 20ma down, MacD below 0

 

Support:  2880, 2850 (200ma), 2790

 

Resistance: 2910 (100ma), 2950, 2980 (20 & 50ma)

 

Observations:

Candlestick – Long black candle with lower shadow.

Histogram –Multiple Rs. No divergence.

RSI – Around 25%. Oversold. No divergence.

Stochastic – Around 6%. Oversold. Narrowing with possible bullish crossover.

Bollinger Band – At lower band. Band opening up.

 

Conclusion:

STI, at last, managed to break out of the sideways range after 2 whole months of sideways movement. Despite possible upside breakout being analysed for the past weeks, STI took the worst case scenario after being affected by the news from the European market. Last week, STI also exhibited strong selling pressure after it broken 2 support levels within a week without significant rebound happening. STI’s mid-term sideways support level at 2910 was broken and therefore, this have definitely change STI’s current trend to be downtrend. STI’s weekly chart’s uptrend is now being threatened to turn. Therefore, it is now very important to identify where the support levels are and how likely the rebound will happen for this coming week.

 

The mid-term indicators were now shifting to the bearish side after STI breaking 2 important support levels. Bearish momentum is likely to continue for the mid-term. For the short-term readings, the Histogram and Stochastic continued their bearish momentum since last week. Stochastic shows that it does have potential to trigger a bullish crossover anytime soon. Furthermore, RSI, Stochastic and Bollinger band were showing that STI is now in oversold region and clearly showed that downside is getting limited and rebound can be expected to happen.

 

In order for STI to be able to rebound, STI’s support level is to be determined. The immediate support level for STI is at 2880 level. The next stronger support level can be seen at 2850 level where it has confluence with 200ma line. These will be likely levels that STI will execute a rebound. Based on the indicators currently, there is a good chance that STI might be rebound off 2880 support level. Due to the possible crossover formation being formed by STI, if STI is able to stay above 2880 during the early week and close with a positive note, STI will be able to perform a rebound for this week.

 

If the rebound is being confirmed, STI’s upside should be determined as lower high formation might be formed there. The current immediate resistance of STI stands at 2910 level. 2910 resistance level could be a strong resistance level to prevent STI from going higher because it confluences with the 100ma line. However, if the rebound is strong, STI might also have good chance of rebounding towards 20ma line and would probably face resistance at 2950 resistance level. If lower high is being formed at either of these 2 levels, STI will be more likely to continue its downtrend and might hit the next support at 2850 level.

 

In conclusion, STI is more likely to stage a rebound this week as the indicators were clearly showing oversold indication. There are 2 possible support levels that STI might test before it rebounds. 2880 will be the immediate support level while a stronger support is seen at 2850 level. The key for STI to rebound will be whether STI will be able to close with a positive closing above its support levels. With a hint of bullish signal from the Stochastic, STI might have a good chance to rebound off 2880 support level this week. Despite expectations of rebound happening, STI’s upside will be limited as the trend has turned downtrend. STI’s rebound could be capped by 2910 resistance level and its best case scenario would be at 2950 resistance level.

 

 

What to watch out for this week:

1)      Testing of 2880 support level

2)      Testing of 2850 support level

3)      Testing of 2910 resistance level

4)      Testing of 2950 resistance level

 

Trading strategy to adapt right now:

-          Long traders can selectively pick positions to long using counter-trend strategies given that the risk and reward is good.

-          Shortists should take partial profits when targets or support is being tested. Add short positions only when a rebound happens and resistance level is being tested.

 

 

*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.

Please consult your respective advisers.