SINGAPORE (July 6): At current levels of 3,366, the Straits Times Index is approaching its Apr 29 high of 3,407, which was also the high for the year. Important highs and lows usually represent a form of resistance or support. In this case, 3,407 is likely to represent resistance. Interestingly, volume has eased mildly as the index rose, a sign that resistance is approaching.
Quarterly momentum has eased, short term stochastics has flattened at the top end of its range, and 21-day RSI has faltered at the top end of its range. These indicators suggest that some form of consolidation is likely soon.
Overall though, the STI could break out of 3,407 this year, as the 50- and 100-day moving averages have formed a positive cross at 3,259.
Annual momentum has strengthened, and has moved above its own equilibrium line, and this could lend strength to the index over the medium to longer term.
Laggards start to move
OUE Commercial REIT has been a laggard among the REITs since its rights issue in Nov last year. However, it is now staging a late in the cycle rally. Prices are breaking out of 52 cents after a multi-month base formation. A successful break above should materialise following a surge in volume, the positive cross of the 50-, 100- and 200-day moving averages, and the upturn of short term indicators. If quarterly momentum is able to rebound off its equilibrium line, it will reinforce the short term indicators and support a price rise to 60 cents.
