STI continues to strengthen but no sign of breakout

Goola Warden

(Dec 13): The Straits Times Index has staged a rebound during the week, and is now facing resistance at its flattening 200-day moving average at 3,224.

Chart 1: STI with moving averages and momentum

Quarterly momentum is at neutral levels of support and has the potential to turn up. The short-term chart pattern shows strength as the index rebounded off the confluence of the 50- and 100-day moving averages at the 3,178 to 3,187 range. Volume is at a low, a sign that the STI is unlikely to break out of its 3,178 to 3,224 range in the immediate term. Volume would need to expand on a white candle day for the STI to follow through with its own breakout.

Chart 2: Short-term indicators

Short-term stochastics is turning up from the low end of its range and looks set to move higher. The 21-day RSI is rebounding off its equilibrium line and could strengthen. ADX is still falling, and is now at a low level of 14. The lower ADX is, the more likely the index is to stay rangebound. In addition, the DIs are neutral confirming that the STI’s movements are likely to be narrow.

The index peaked temporarily at 3,285, before retreating and this level is likely to provide resistance when prices rebound.

REITs undergo temporary correction

Although the STI strengthened on Friday Dec 13, it was not a good day for REITs which continue their correction. This appears to be taking place on a rotational basis. Earlier in the week, Mapletree Industrial Trust and Mapletree Commercial Trust experienced retreats. On Friday the 13th, Ascendas REIT succumbed to a sell-off.

For Mapletree Commercial Trust, (see chart) a closer look reveals a slight expansion in volume on a shaven black candle day on Dec 12, and on a doji day on Dec 13. In the immediate term, support at the still intact 100-day moving average currently at $2.25 may stop the immediate decline. This level needs to be watched, as does the $2.20 level which could turn out to be the neckline of a top if we’re not careful.