Caught unawares. The weekly 5.3% surge in the Straits Times Index (FSSTI Index) did not pan out in accordance to our playbook and took most chartists by surprise (including us) as most of them were expecting either consolidation or bearishness. Trading volume that was higher-than-usual had managed to propel the STI to 2,434, a trading high for the whole of 2009 so far.
The 2,424 mark would be critical. We have thus revised our Wave Count as our previous call for the STI to ride on a corrective Wave C did not occur. Price action in the next few trading days will be pertinent – should the STI manage sustain a close above the 2,424 level, this would mean that the current Wave 5 is not a Wave 5 failure and that further gains should be expected. The 14-day ADX that is turning up does suggest that the present (bullish) trend is strengthening.
To go long, but.... We recommend traders to engage in long positions only when the STI manages to sustain a close above the 2,424 mark for the next few days consecutively. Should that occur, the STI could then accelerate to its immediate resistance level at the 2,504 – 2,533 area where a technical gap resides – additional resistance is also available at the 2,605 level if this technical gap is filled. However, if the 2,424 level is not broken through convincingly, the STI may then correct all the way to the 2,291 – 2,294 region where the 50-day moving average resides.
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