STI has displayed exceptionally strong momentum, corrections have been milder than we anticipated and rallies sharper. We also notice that the correlation between the S&P 500 and STI is beginning to weaken. The STI continued to rally past 1900 today despite a lower close by the S&P 500 on 14April09. This might be due to a change in global investing sentiment that is shifting its focus to the emerging markets/Asia.
The STI closed at 1905 on 15April09, above resistance at the 1900 level. This indicates that the odds are in favour of the STI continuing higher. There is no resistance until 1950 to 1960.
The STI is approaching the 1950 to 1960 region rather quickly. This is a significant resistance zone and we are expecting a decent pull back and consolidation around this region before the uptrend continues. Investors might want to take some profits when the STI approaches this level.
As the STI rallied by more than 30% over the last 5 weeks, it has now reached an important juncture, the upper channel line of a 5.5-month near-horizontal price channel.
While a strong positive break out above the Jan ’09 high of 1960 could mean more medium term upside for the STI, a reversal could signal the start of another down-leg back to the lower channel line again.
With the technical indicators (RSI, MACD histogram, CCI and Momentum indicators) showing bearish divergence to the STI’s price action over the last 3 weeks, it seems to suggest that the current rally might not be sustainable.
Should the share price correct, we expect a pullback to the support level at around 1670 (minor trough in Mar ‘09), followed by 1457 (Mar ’09 low).
Any upside from the current level will likely meet resistance at around 2220 (Oct ’08 high), followed by 2600 (Sep ’08 high).
Sponsored Links
No comments:
Post a Comment