Update on STI 12 April 2008

On Monday 7th April 2008, the STI closed above the 3170 level "confirming" the double bottom based on chart pattern. However it must be noted that volume was light on that day and candlestick wise it had formed a "hanging man". These 2 features pointed towards tiring momentum and a possible reversal point rather than a true confirmation of a bullish double bottom reversal pattern.

True enough, the subsequent days confirmed the bearish "Hanging man" reversal candlestick. As my friend so eloquently put it : "Yesterday we hanged the man, and today we bury him."

It is interesting to note however that the candlesticks of the last 3 days (ie 9-11 April 2008) form a "morning star" pattern. This can be viewed as a bullish reversal sign. The Candlestick on 11th April is also a "bullish belt hold". Signs were pointing towards a good run on Monday. However the US market folded on Friday night! Which is rather frustrating because sometimes you wonder if reading STI charts are worth anything at all if they are just going to follow the US market movements?

Note the break in trend line for the RSI levels. The more gradual upward trendline though is still far away.

Key support level would be 3000. Likely where the 25 and 50 day moving averages will crossover. If 3000 gives way, it will represent a shorting opportunity where the STI will cover all those gaps made 2 weeks ago and probably test the 2745 lows made in Jan and March 2008.

Key resistance would be 3170. However a strong high volume break and close above 3170 would most likely see STI rally to 3300 (most likely where the 200 day moving average will be)

I will correlate this on a time based factor later when I analyze the US charts.



I have started to use an additional tool to look for major trend changes. This is the crossover points of the 10 SMA , 20 EMA and 30 EMA I had previously mentioned on a blog entry this week.

If you look at the above chart you can see that the moving averages had indeed crossed over recently. This signifies a mid term trend change to the upside. However as the lines move further apart, it usually signals that the momentum of the trend is weakening and there might be pullbacks or even reversals of the trend.

We can see that on the STI the 10 SMA has pulled too far away from the 20 EMA and 30 EMA. Hence I do expect a pull back coming.

Conclusion : Expect STI to fall on Monday and test 3000 level. Expect 3000 level to hold.