Will the STI Sink into a Correction Territory?

Will the STI Sink into a Correction Territory?

Since reaching a high of 3,466 points on 17 February 2022, Singapore’s benchmark Straits Times Index (or STI) have subsequently retraced – at the time of writing, it is about 77 points (or 2.4%) shy of falling into the correction territory (when falls by more than 10% from its high) at 3,119 points and below. 

This post was originally posted here. The writer, Lim Jun Yuan is a veteran community member and blogger on InvestingNote, with a username known as @ljunyuan and has close to 2,000 followers.

The big question is – will the STI fall into a correction territory? If you ask me, I would think there’s a 50% chance it may happen – it will largely depend on how the US indexes moves (as the STI tend to mirror its movements.) In terms of technical analysis, the candlestick patterns on the previous 2 trading days are red bearish candlesticks, with stochastic in a downtrend position and pointing downwards (suggesting that there could be further downsides in the coming days ahead); on the other hand, stochastic is already in an “oversold” position, which suggests that any further downsides could be short-lived.  

Looking at how the STI may possibly move in the near-term, should it continue to remain bearish, then it could further go down to a low of 3,165 points (which is the low of the candlestick on 12th May) to form a “double bottom” candlestick pattern before rebounding from there. Alternatively, it could continue its downward fall to the correction territory (with the 3,119 point mark forming a strong support) before rebounding (or it could even fall further down from there, and the STI will officially be in a “correction market”.) 

On the other hand, if we were to see some recovery, then do take note of the 2 most immediate resistance lines – first at 3,228 points (where the 200-day Exponential Moving Average (EMA) on a daily timeframe is), and second at 3,286 points (where the 20-day EMA on a daily timeframe is.) Looking at the Index’s recent movements above, I’m sure you will agree with me that the 2nd resistance is a very strong one – and the STI could retrace once again after hitting it. 

Hope you’ll find my personal technical analysis of how the STI could potentially move (both in the bullish, as well as in the bearish scenario) useful. As always, do take note that everything you’ve just read above is purely for educational purposes only, and you should do your own due diligence before you embark on any investing and/or trading decisions. ?

Once again, this article is a guest post and was originally posted on Ljunyuan‘s profile on InvestingNote. 

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