The Straits Times Index managed to end the Year of the Rat above its 50-day moving average which has flattened at 2,901. Although the STI had fallen below 2,901, it had remained above its 50-day moving average whose ascent has leveled off in the past week, from 2,892 to 2,901. The index ended the second week of Feb at 2,925, up 18 points week-on-week.
However, despite the STI hanging on to its own moving average, its quarterly momentum has fallen below its 50-day weighted moving average. This move takes the indicator below a support. If the index follows quarterly momentum lower, it too could break below a support, and move towards lower levels, to around more substantial support at 2,795. Moving averages are helpful support and resistance guides, and the 50- and 200-day moving averages often act as support lines in uptrends, and resistance lines in downtrends.
What should prevent a sharper decline are stochastics and directional movement. Stochastics has turned up from the bottom of its range. ADX continues to fall and the DIs remain neutral, preventing a strong decline.
Among the STI’s component stocks, several are moving either sideways or lower. Singapore Telecommunications is meandering sideways but could weaken. Developers and REITs are likely to ease. The banks could hold their own for the time being. Elsewhere, rotational interested may keep selected tech stocks in the limelight.
As a case in point, CapitaLand Integrated Commercial Trust was unable to meet its potential and has since eased and, at $2.14, has dipped below its 50-day moving average which is currently at $2.16. Since quarterly momentum has broken below an uptrend and its own moving average, prices are likely to ease further, towards the $2.00 to $2.05 range before they are able to stage a recovery. In the immediate term, $2.16 is the resistance level. The high of 2021 was $2.34.
