Our view that “any further declines will be contained” for the Straits Times Index (FSSTI Index) as mentioned in an earlier report is now further strengthened after price action managed to stay above the 1,640 level for the eighth week running. Given that the moving averages within the MACD chart and the bollinger bands have also trended up in sync since the STI bounced off this 1,640 mark, we believe that the index could possibility have bottomed out earlier during late Oct 08 when the STI had hit a low of 1,473.
Collectively, some of the short-term technical indicators are depicting a slightly bullish inclination. The bollinger bands have started to widen, implying a potential expansion in trading range. Taken with the bullish moving average crossover within the MACD chart, we believe that price action could be biased towards the upside. Nevertheless, we do note that the protracted decline within the 14-day ADX is representative of the lack of any prevailing trend within the STI.
Short-term support is seen at the 1,710 – 1,720 area as identified by a technical gap. Should this level give way, additional support in the form of the lower bollinger band and a series of daily lows at the 1,640 mark is expected to cap any further downside. On the other hand, any bullish price action would meet with short-term resistance at the 1,850 – 1,880 range where a certain 61.8% fibonacci move and a technical gap resides.
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