On 3 August 2018, Straits Times Index (STI) rose from an open of 3,300.59 to a high of 3,311.64 before tumbling down to close at 3,265.73. It was a decrease of 20.59 points. What does the drop tells us about the price action? Simply, there was a price rejection observed above that whole number minor resistance - 3,300 level.
About two weeks ago, I have shared my analysis of STI for 23 July 2018. My view was that the STI is likely to go up and test the resistance at 3,340-3,360 region, as I observed signs of accumulation via the inverted head and shoulders pattern.
Picture 2: STI before 23 July 2018.
True enough, only on 26 July 2018, STI made a high of 3,341.42 - just barely touched the 3,340-3,360 resistance just by 1.42 points before going into a tiny consolidation. And that's it. Neither candlesticks have closed at the 3,340-3,360 area since price broke below the same area on 18 June 2018. Furthermore, only two candlesticks made a touch at the 3,340-3,360 area (19 June and 26 July).
So what's next?
Since STI failed to hit the 3,340-3,360 resistance (let alone staying above), the only way is to go down. Take a look at picture 2.
Picture 2: Chart of Straits Times Index, with support and resistance lines.
While moving up towards the 3,340-3,360 resistance, price made a constant upward momentum - which can be drawn along with a blue upsloping trendline. I talked about the failure to break above that 3,340-3,360 resistance and what happened? Price began moving down and even broke below the blue upsloping trendline on Thursday, 2 August 2018. A secondary confirmation came the next day (3 August 2018), when price continued to close below the trendline, halting further bullish strength and resuming the downtrend. This spells trouble for the bulls.
With that, I do not think that the support at 3,260-3,280 is able to withstand the selling pressure and therefore, my 1st target shall be 3,170-3,200 area (whole number support of 3,200). What's more, if 3,170-3,200 area still doesn't hold, further bearishness can slide in, giving me a target of 2,800-2,840.Yes, you saw that - below the psychological 3,000 and by the way, is a projection of the bearish flag formation (if it happens).
Maybe some might still remember one of my STI analysis where I gave a view that STI can hit 4,000 level, the next psychological level that once hit, opens up to near-unlimited jubilation and exhilaration among investors. My stand remains the same, it is likely for STI will eventually hit 4,000 but for now, it is currently testing the low. Hitting 4,000 might take months, if not years (maybe a year or so).
