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Market's breakout still valid, STI to test 3,300

Goola Warden
Goola Warden • 2 min read
Market's breakout still valid, STI to test 3,300
SINGAPORE (Jan 11): There was little change in the upward direction of quarterly momentum and the chart pattern during the past five trading sessions with the Straits Times Index gaining 30 points week-on-week to end at 3,255. 
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SINGAPORE (Jan 11): There was little change in the upward direction of quarterly momentum and the chart pattern during the past five trading sessions with the Straits Times Index gaining 30 points week-on-week to end at 3,255.

Chart 1: STI with moving averages and momentum

This takes the index to within earshot of an initial resistance at 3,262. The volatility caused by geo-political uncertainties had very limited impact on the local market.

The breakout made by the index on Jan 2 remains valid. Medium term indicators have turned more positive, with the 50- and 200-day moving averages poised for a positive cross at 3,225 establishing this level as a support.

As the index challenges 3,262 in the sessions ahead, it should gain sufficient momentum to rise above this level to test 3,300.

Chart 2: Short term indicators

Although short term stochastics has turned down from the top end of its range, its impact is likely to be limited. Quarterly momentum and 21-day RSI continue to rise and these indicators carry more weight than a short-term indicator.

ADX fell to 10 and this is the lowest level in the past 12 months. DIs are neutral. If ADX turns up and the DIs turn mildly positive, it could imply that the index starts a more pronounced uptrend.

The STI has underperformed the S&P500 during the past 12 months. If the breakout is sustained, the index could play catch up.

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