STI breaks out, set to test 3,300

SINGAPORE (Jan 3): On Jan 2, the Straits Times Index (STI) broke out of a narrow sideways range it had been entrenched within since early November.

Chart 1: STI with moving averages and momentum

The Index rose 30 points to 3,252, taking it above the confluence of the 50- and 200-day day moving averages at 3,213 and 3,224 respectively. The breakout was accompanied by a slight expansion in volume and firming quarterly momentum.

The 3,362 level is a resistance, hence the STI retreated on Jan 3. However, the breakout remains valid, and the index is likely to strengthen in the sessions ahead. As the index challenges and moves above 3,252 it should gain sufficient strength to move above 3,285 to test 3,300.

Chart 2: Short term indicators

ADX has been stuck at 11 since Dec 19, an indication that the index was in a narrow sideways range. DIs remain neutral as they have done since Nov 28. Since short term stochastics – although at the top end of its range – is still in rising mode, and 21-day RSI remains firm. ADX could turn up. If this occurs as the DIs are turning positive, that would reinforce rising quarterly momentum and lead to a fillip in the STI.

Since both short and medium term indicators are broadly positive, the index is likely to continue to strengthen in the next several sessions.