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Straits Times 3,115.18 -12.56 -0.40%
Hang Seng 26,194.12 +145.40 +0.56%
Dow Jones 26,252.24 +49.51 +0.19%
Shanghai Composite 2,899.86 +16.42 +0.57%
Technically, That Is Bearish!
Trend Spotting | 05 February 2010
By: Xavier Lim
Articles (51) Profile

The recent fall in the stock market left investors panicking as they were not prepared for such a sharp decline. Analysts were looking for this bull market to last until at least the second half of the year. However, at least for now, some of the chatter has gone from “how high will the market go?” to “how low will it fall?”. The market has changed its tone, leading to a new environment of caution, not expectation.

Strong resistance line. The STI failed to regain the support of the 100-day moving average, which is currently at around 2,750. Any persistent failure may result in the STI pulling back to retest the next key support at 2,700 (resistance-turned-support). However, if STI is able to break through the 100-day moving average, rebound back to 2,800 again, we cautiously expect the STI to likely to form a head-and-shoulder formation.

Indicators show bearish signals. The 25-day and 50-day moving averages appear to be forming a bearish crossover, while the RSI continues to trend lower, below the 50% mark.

Weak support line at 2,700. We expect the index to find immediate support somewhere at 2,700. Breaking it, the next key support is likely at 2,520, a very strong psychological support where the index touched only once earlier in August before continuing its uptrend.

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

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