FSSTI in final leg of wave 3; expect resistance near 2,330-2,350

The previous steep rally in the FSSTI was a wave iii of 3 move, which most often is the most dynamic move. The pullback from that level saw the index retracing exactly 38% of the preceding move, which is a key fibonacci retracement level of the move. The present move is the final leg of wave 3, which should terminate near 2,330-2,350. This should be followed by a steep pullback.

What to expect:
a) at least one more gap up in the index.
b) lower volume compared to wave iii of 3.
c) divergence on RSI and MACD as the index breaks above the previous high of 2,284.
d) lower market breadth compared to previous wave iii.

We are already seeing second liners rallying sharply. Second-liner property stocks have rallied while previous leaders have stalled. Wave v of 3 should see a broad-based rally but with breadth lower than that of wave iii. We recommend quick trades on City Developments at S$8.20 (Target: S$8.70), SGX at S$7.20 (Target: S$7.80), Wing Tai at S$1.27 (Target: S$1.45) Yangzijang at S$0.745 (Target: S$0.82-0.84, see last week’s report), and Straits Asia at S$1.41 (Target: S$1.80)

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