Saturday, April 21, 2007

STI analysis

Decided to do some detailed analysis on STI.

Above is the weekly chart of STI. We can see a bearish candlestick formation - bearish engulfing. Of course bearish engulfing candle stick doesn't mean it will actually happen but the chances is that it might. If formation is true, that means the next week we'll see STI going down since we're using the weekly chart. I believe Monday STI will gap up due to strong Dow showing on Fri (+150) but might show weakness after Monday.

On the whole, STI is still bullish. I noticed that there is a flag formation starting on the 1st week of march to the 2nd week of april, with measured measured flag target of 3970. Of course we'll see STI consolidating the next few weeks. As long as it doesn't come close to the lowest flag formation (2930), the formation shouldn't be negated. Of course this is my amateurish TA analysis.

On STI daily charts, a double top formation is already seen, a bearish reversal formation. However, we bounced back on last Fri. This doesn't negate the double top formation as long as we did not shoot above the highest of the double top: 3450. Here, 2 scenarios can happen: we can go up around 3450 and come down below 3290, we'll have a lower high and lower low, signalling a downtrend for STI. 2nd scenario is that we shoot above 3450 and come down above 3450 before rebounding upwards again, forming a uptrend. Of course, we can always trade sideways up and down.

Combining other technicals oscillators like stochastics (blue below red, both trending down) and MACD (blue cross below red, red histogram doesn't show signs of peaking yet) as well as RSI (downtrend in sight), it doesn't seem like we can overcome 3450 in the recent future.

Certainly looking at both weekly and daily, I will say STI will go up in the short term (1-2 days) but will go down for the next few weeks overall. Macrowise - golden week labour day for China and Japan with expected low market volume makes it hard for STI to break resistance. Dow is also breaking new high for like 3 days already, so might reverse soon. The more impt bearish point is that earning seasons for Dow and STI is ending in May. All this makes me believe that STI have quite a good probability to correct further in the month of May.

I would personally avoid stocks found in STI index. Penny play seems to be the in thing, just look at the top volume for the recent weeks. I'll bet on construction stocks with high visibility until June/july period because of the award of construction contracts for IR. During US hurricane season (begining August), I'll bet on oil stocks and alternative oil plays like Wilmar. Last week we don't have a single hurricane hitting US shores but I don't think this year would be so lucky again.

If this looks so much like fortune telling, well, sorry! I'm trying to practice my technicals, so what is the best way than to post here in advance to practice? Pls treat all this as nonsense and don't act on anything posted here without doing your due diligence.