The continued optimism displayed by the US stocks overnight, coupled with a strong showing by the Nikkei in early morning trading is likely to inspire the STI to climb higher this morning.
We note that the last month's consolidation had resulted in the formation of a symmetrical triangle continuation pattern very similar to the one formed in early Jun'09 - mid Jul '09, which was subsequently followed by a strong bullish breakout to a new 2009 high of 2700. As such, any signs of a strong positive breakout in the days ahead could imply a similar outcome and propel the index towards the key support-turned-resistance level at 2740.
As before, we note that the technical indicators are starting to turn more positive, with the daily RSI rebounding strongly off the 50% mark and the daily MACD indicator on the verge of a bullish crossover.
On the upside, the immediate cap remains at 2681(50% retracement of 3906-1455 plunge), ahead of 2700 (psychological).
We continue to peg the initial support at around 2600 (mid Aug low); below this, the next strong support is at 2521 (mid Aug low).
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