Sunday, July 31, 2016

STI Bearish Divergence - More falls on the way

The recent week was bad with gloomy news all over the places...
From increasing unemployment 2Q16, to Swiber going from liquidation to judicial management (both are bad); not to mention California Fitness closing with alot of people's monies gone from those "good deal" yearly plans that were so actively sold.
No amount of Small Claims Tribunal, Lemon's Law etc. could help in this, when a business cease; unless in the rare incidents when there still cash left after paying all the bills, salaries, then there could be some refunds/return to consumers...

Some value buyers might think these are all one-time incidents only, and eager to catch some value stocks, blue chips etc.that have rose from its bottom in Feb-Mar 16, until cheap become cheaper.
Beware of falling knives!

My advice here is do not buy yet, not this week, not next week, not even the entire August.
Why?

Below is the weekly Chart that I've captured from LTS-ChartNexus software.

If you notice, our STI index rose above 2950 only to come crashing down the past week.
Some optimistic analysts celebrates, because they cited STI still posted a gain in July 16 & predicts STI will soon rise again after retracement to its EMAs.

Me? I don't think so.

If you look carefully, STI hit the resistance, where it previously hit in the week (25-29 Apr 16) but came down. While one may argue the setup is still bullish, due to the higher low twice hit in the week (9-13 May 16) and (27 Jun - 1 Jul 16), this is not a bullish trend.

2 Indicators were shown, one is Force index which measures strengths of the bull (rise) via volume and price increase; the other is MACD, its histograms measures the differences between 12 and 26 moving averages (the default settings), a rising histogram means its fast rising (thus the diverging fast 12 and slow 26 moving averages).

Basically both shows a lower peak versus the previous, thus this fall is likely to hit 2700 & possibly even lower. In a extreme bearish case, it might go close to retest Feb 16's low of 2540, but my gut feel is it will be between 2540 & 2690, a final stab before a true bull run.

It could be similar to the earlier box I've drawn, but don't expect the same; history rhyme but seldom repeats.

Good Luck Training! May the trend be with you ;)


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