A Period of Indecision in STI

26 December 2008

One will heard endless arguments about where STI will move in the coming weeks. Some will say that a plunge is imminent while others will disagree. This is all because STI has entered a period of indecision.

Progress Todate
STI has plunged more than 54% since October 2007. It has just recovered about 8% or 130 points from its low at 1,613 on 20 November 2008. It has been moving sideway ever since and is presently trapped in a symmetrical triangle formation as shown in the attached graph.

doubleclick for enlarged view

Going Forward
Presently, US has been reporting very poor economy figures; the Singapore's economy figures are not any good either. Many analysts, including Mr. Daryl Guppy, had projected selling pressures in STI although they were not too sure of the exact market movement next because of the symmetrical triangle being formed in the STI's chart.

Mr. Guppy had 2,300 on the upside and 1,250 on the downside.

What the Chart is Telling Us?
The above daily chart shows the symmetrical triangle that Daryl Guppy has mentioned. The chart is also telling us that:

Bearish looks:
a) STI has formed another bear flag with its based at 1,600;
b) It tried twice recently but failed to break the upper triangle trendline

Bullish looks
a) Its 20-day MA is rising and the 50-day MA, flattening out; the 20-day MA is about the cross the 50-day MA;
b) It's Stochastic has reached the oversold region.

Neutral looks
a) It's volume is thinning out as it goes sideways or slightly lower;

Future Movements
The chart also tells us the future movement; for example:

a) Heading lower when the lower trendline of the symmetrical triangle is broken.
If the last low of 1,600 support is also broken, STI will want to target for 1,250, which is the equal length measured from the 1,600 base of the flag pole to its last high. If this target of 1,250 is broken again, the next target is likely to be around 1,050.

b) Heading higher when the upper trendline is broken.
If the top of the Bollinger Band (shown dotted in red) is broken, it will want to target for the 100-day MA line. Next, it will target for the 200-day MA line which happens to be the trendline of the peak since October 2008 (shown blue in the chart)

However, for both events to happen, there must be also a surge in the trading volume; otherwise, STI might just continue its sideway movement, much like the breakout of the triangle on 9 December 2008 (shown dotted in blue)


Information here is for sharing and learning. It is not intended to give any advice on any stock or movement or trend of any index. If a price or movment of a stock/index is given, it is only intended for illustration. The reader shall verify the information given here before using them.

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