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More bearish signs for Straits Times Index; shifts to lower trend line

STI ‘death cross’, resistance at key Fibonacci Retracement level

The Straits Times Index’s recent correction, if the word correction can even be used at all, cannot be totally unexpected.

  1. Back in May, we saw how the STI printed bearish signs #1, #2 and #3 in the form of “pin bar, bull trap, 76.4% Fibonacci ratio“.
  2. Late June, I posted what I thought was bearish sign #4 in the form of “evening star“.
  3. And then in August, an un-numbered bearish sign which we will update here, 50-day and 200-day moving average approaching death cross.

Perhaps the most explicit caution I wrote

But investors who give a lot of weight to signals coming from technical analysis will do well to plan for the worst. And any consolidation between now and the forthcoming correction should be employed with some urgency.

 

Straits Times Index bearish signs #5 #6 #7

Signal #5  – the 50-day and 200-day exponential moving averages made their death cross late August so that the 50-day short time trend is now below. This is bearish. The next signal #6 came when we see the 200-day moving average pose as resistance throughout November. Bearish signal #7 – the breakdown of a triangle chart pattern which is usually a consolidation pattern but now exposed as a distribution.

Straits Times Index

3 signs that the STI is not doing well

 

Shifting to lower trend line, lower support; what to look out

Investors should look at action from the index to observe if there is any support from this lower trend line. If support can be found, there is hope that bullish players may enter the field to buy the dip.  If not, 3000 becomes an important round number psychological support and technical support to look forward. Short term speculators can expect the index to go lower.

Straits Times Index weekly chart

This chart serves out the bigger picture

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Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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6 thoughts on “More bearish signs for Straits Times Index; shifts to lower trend line”

  1. Daniel Ku Guet Liang says:

    GrandMaster, any chance EWUS can be applied to STI?

    1. Soh Tiong Hum says:

      EWUS to long? How will you set your stops?

      1. Daniel Ku Guet Liang says:

        stop-loss @ around 3050-25 level?

        1. Soh Tiong Hum says:

          Possibly. You can do this if you are 1) convinced that the trendline will provide support where the trend is still up 2) doing just a speculative play only.

          In the right application, EWUS is used to enter a limit order at a level where price retracement stops and price is likely to revert back to trend. Based on the death cross from a 50-day and 200-day moving average (which is a commonly used method), the Straits Times Index’s up trend is over. Here is a chart for your reference. http://www.pinterest.com/pin/511580838893199341/

          1. Daniel Ku Guet Liang says:

            better stick back to forex. haha. I was pondering if there is any last burst before the 7 year cycle (is it called Jospeh cycle?) kick in.

  2. Soh Tiong Hum says:

    Hey Daniel,

    You don’t have to stick to forex only. But I do strongly recommend sticking to some rules like ‘do trend-following trades only’. If the STI is truly game over, what you don’t lose doing the counter can buy you a lot more if STI goes cheap cheap. If it goes half, you can buy double. Good time to make some generational wealth.

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