Technical Analysis: Straits Time Index – Surprise gain above 2,500 sees the resilience of the STI October 12, 2020 146

  • A buoyant Wall Street and hope of more Stimulus news spurs the hopeful Straits Time Index back into the 2,500 region in mid of last week.
  • However, Friday saw prices remain strongly resisted at 2,549 region
  • Overall, STI is seen trading within a range bound between 2,800 and 2,200

 

STI has seen prices rises on the upside after it rebounded from the upper boundary of the support zone 1 and the subsequent break from the downtrend line in end September.  

Moving forward, the STI is likely to break higher and invalid the whole of impulse wave iii is high despite the formation of the evening star last Friday. To confirm the upside, the immediate resistance zone which is also the invalidation zone for wave iii must be broken. Should that occurs, the STI is likely to form a prolonged corrective wave ((4)) with prices potentially testing higher resistance zone at 2,800 region.

 

Another school of thought is quite similar to the analysis on Fig.1, which state that the STI may be heading for a prolonged corrective action for wave ((4)). Figure 2 explain what will happen should the wave iii invalidate.

So in this case, the corrective wave ((4)) will then proceed on to form a double zig-zag formation. Looking closer, there seems to be some sort of fractal movement after STI rebound in Mid-March 2020. First, the smaller AB Wedge is actually the larger fractal pattern of ((A)) ((B)) and then WX. However, the latest and the largest falling wedge pattern has a limited upside and prices begin reverting lower, indicating a loss of bullish momentum. Hence, the likelihood of price movement in the scenario is that prices will reject the resistance zone and head lower to support zone at 2,200 region.

However, should prices breaks the immediate resistance zone strongly, then we would see wave X being formed at 2,443 level, bringing the price higher to 2,900-3,000 region to complete wave Y.

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Profile photo of Chua Wei Ren

Chua Wei Ren
Technical Analyst
Phillip Securities Research Pte Ltd

Wei Ren specialises in Technical Analysis and has 9 years of experience in studying classic technical price action. He also study and research extensively on Elliott wave theory, Dow Theory and Supply & Demand strategies as he believes that history plays an important role in how the market is reflected in the future.

He graduated with a Bachelor of Economics and Finance from University of Murdoch.

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