During the week, STI has ran up from the established higher low as anticipated last week! (posted on 20/7/13, http://stistockstrading.com/2013/07/20/sti-weekly-update-23/ )
This run up has allowed STI to break the 50Day Moving Average resistance convincingly with high trading volume on Tuesday (23/7/13) as highlighted in the chart. The bullish run was subsequently resisted by the 100Day Moving Average resistance, causing a pull back to the 50Day Moving Average, which is acting as a support now.
The 30 points retracement during the last 2 days may deemed to be heavy but there’s positive from such pullback as it was met with lighter trading volume. This indicates the ease of the selling pressure before opportunity for buying volume to return and push the index further up.
Do note that Stochastic Indicators (In the daily chart) has signaled a bearish crossover which signifies the potential of further retracement in the coming week. However, the uptrend channel established by STI remains intact as long as 3200 classical support holds. The confluence of 20Day and 200Day Moving Average at the level reinforce the strength of the 3200 classical support.
MACD Histogram and Stochastic Indicators from the weekly chart (as below) may still be showing room for more upside on this run. However it is important to note that price action takes precedence over such momentum indicators and we should not allow it impact our bias towards the sustainability of the price action.
The immediate resistance for STI is at 3281 level, which confluence with the 100Day Moving Average. In the weekly chart (as below), the index is resisted by the 20Week Moving Average at the same level. Therefore, It is critical for STI to break this resistance level for more upside, and negate the week’s bearish reversal signal (shooting star candlestick) on the weekly chart.
Enjoy the weekend and stay prudent to your trading!