Technical Pulse: Straits Times Index July 11, 2018

Technical Buy

Straits Times Index – Daily timeframe (Update from 25 June 2018)

*Entry Price: 3,285     Stop loss: 3,165      Take profit: 3,469

Current Sentiment: Bullish

Support 1: 3200                    Resistance 1: 3,354

Support 2: 3189                    Resistance 2: 3,469

The dragonfly doji rejection from the last update failed to hold. As a result, the bearish momentum accelerated.

Price initially broke below the 3200 psychological round number initially on 06/07/18 as it closed at a low of 3176 points. However, the bearish momentum appears to be fading as buyers re-emerged the following day and closed price back above the critical 3200 psychological support. Moreover, the subsequent bullish follow-through on 10/07/18 signals further sign of strength as it broke above the immediate downtrend line.

Keep in mind the Relative Strength Index (RSI) has been oversold since 14/07/18 as it hit a low of 23 on 25/06/18 suggesting for an imminent rebound. RSI measures momentum. A reading above 70 represents overbought condition while a reading below 30 represents oversold condition. With the recent bullish breakout, the RSI has also risen back above the 30 oversold region suggests the start of the mean reversion higher.

Hence, expect the STI to recover back into the long-term uptrend next for price to test the 3,354 resistance area followed by 3,469.

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Jeremy Ng
Investment Analyst
Phillip Securities Research Pte Ltd

Jeremy specialises in Technical Analysis and has 10 years of experience in studying price action. His areas of expertise include intermarket analysis on the equities, currencies, commodities and bonds market.

He is also a regular columnist on The Business Times - every Monday ChartPoint column.

He graduated with a Bachelor of Science in Banking and Finance from University of London.

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