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STI held down by some heavyweights

Goola Warden
Goola Warden • 2 min read
STI held down by some heavyweights
SINGAPORE (Feb 21): The outlook is uncertain according to the many strategy reports that are published daily.
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SINGAPORE (Feb 21): The outlook is uncertain according to the many strategy reports that are published daily.

Chart 1: STI with moving averages and momentum

Hence, even though the Straits Times Index could be buoyed by the uptrending REITs, other big cap stocks such as the banks are rangebound, and the heavyweight Jardine group including Jardine Matheson are entrenched in very narrow sideways ranges.

The nature of a bellwether index is to reflect the prices of a variety of sectors, and the STI is doing just that.

Since the start of February, the STI’s trend has been sideways. Indicators as they are positioned currently, and chart patterns suggest that prices are likely to stay rangebound, with a downward bias.

As the Straits Times Index moved sideways, volume contracted, suggesting that the move is corrective. In addition, resistance, coupled with the confluence of the moving averages at the 3,220 to 3,231 range, continues to impose a ceiling on rebounds for the index.

Chart 2: Short-term indicators

Short-term stochastics is rising but its impact is minimal as the longer-term momentum indicators are falling. The 21-day RSI has started to retreat and is just beginning to ‘peel’ away from its equilibrium line. ADX is falling and at 18 as the DIs are neutrally positioned. ADX confirms that the market is unlikely to rally strongly.

Long term annual momentum has weakened, and two-year momentum is in a downtrend, and these are likely to limit rebounds, and cause some weakness. In addition, these longer-term indicators may pressure short term indicators limiting any short term rebound.

If the STI succumbs to selling pressure, support appears initially at 3,153. The low in the last six months was at 3,056, in Aug last 2019. Resistance has been established at 3,220 to 3,231.

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