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Straits Times 3,115.03 -11.06 -0.35%
Hang Seng 25,734.22 +238.76 +0.94%
Dow Jones 25,886.01 +306.61 +1.20%
Shanghai Composite 2,823.82 +8.03 +0.29%
An Unconvincing Break Through Resistance Line
Trend Spotting | 30 October 2009
By: Xavier Lim
Articles (51) Profile

Strong resistance line. Despite breaking through the key 2,700 resistance line, the STI did not manage to hold on. Undecided on which direction to continue moving, the index has been hovering around the resistance line, signaling a near-term downward pressure on the STI.

Indicators show bearish signals. The RSI indicator did not make its way higher when the STI break through the key resistance line, and started to fall towards the 50% mark, a sign that the bullish momentum is waning.

Initial support at 2,500. We expect the index to find initial support somewhere at 2,500. Breaking it, the next key support is likely at 2,400 (resistance-turned-support), matching year 2005’s high.

Immediate resistance at 2,700. Immediate resistance remains at 2,700. The index is currently challenging its 25-day and 60-day moving average (MA), which formed a bullish crossover earlier in April. With the US indices showing signs of near-term fatigue, the STI seems likely to violate the 25-day MA. Our view is that a near-term correction phase appears to be underway.

Armed with an arsenal of investment knowledge, Xavier is the Senior Research Editor at Shares Investment.

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