Price action for the Straits Times Index (FSSTI Index) during the previous week was lacklustre as trading was kept in a considerably tight 49-point range from 1,697 to 1,746. The bollinger bands have also contracted sharply during the past four trading days, indicating that volatility may shrink even further. Coupled with the continued descent within the 14-day ADX, it is therefore highly probable that this narrow trading range seen in the STI could remain.
Furthermore, the 14-day RSI which is currently slightly below the 50 mark, has stood in an almost horizontal line for the last five trading sessions that signifies the lack of any trading momentum. Taken in all, we believe that the STI would trade and bounce around the 1,700 – 1,800 region for the week.
Nevertheless, in the event that price action were to trade beyond this range, we also note that the break of the 1700 / 1800 level is expected to translate into further downside / upside going forward. Should immediate support at around the 1,700 mark were to give way, further support would not be available until the 1,640 level. On the other hand, if initial resistance at the 1,806 – 1,812 area were to be broken, the ensuing momentum may push the index up to the 2 resistance level at the 1,850 – 1,880 region.
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