SINGAPORE (Feb 14): Resistance for the Straits Times Index appears near its current level of 3,220 to 3,231, at the confluence of the 50- and 200- day moving averages. During the past five trading sessions, volume languished and eased.

Chart 1: STI with moving averages and momentum

The price rebound coincided with a rebound by quarterly momentum which found resistance at its equilibrium line. Quarterly momentum may have difficulty moving above its equilibrium line and the likelihood of a retreat from its current level is more likely. This would undermine any attempt by the STI to challenge its resistance area successfully.

Chart 2: Short-term indicators

Short-term stochastics rebounded off the low end of its range at the same time as 21-day RSI bounced off the low end of its range. ADX rebounded but has resumed a retreat suggesting that the index is unlikely to start trending strongly in the next week or so. Support has been established at 3,153.

Longer term indicators such as annual momentum and smoothed two-year momentum are weak, with 2-year momentum declining. These indicators may pressure shorter term indicators and prevent the STI from staging a stronger rally.

Frasers Centrepoint Trust’s volume shrinks as prices rebound

Although the uptrend remains intact, and supported by rising moving averages, volume levels have dissipated noticeably. This usually materialises towards the end of a move. Quarterly momentum rose sharply and is now in a resistance area.

Short-term stochastics has flattened after hovering at the top end of its range. Similarly, 21-day RSI is near the top end of its range where it is moving sideways. ADX is at 11, a low level, indicating the onset of a sideways trend with prices likely to be entrenched within a range.

Resistance is at hand at $2.93. In addition, prices formed a minor shooting star on Feb 14. The 50-day moving average should be able to act as a support line and it is currently at $2.80.