The Straits Times Index is likely to continue to strengthen as upmoves are being accompanied by rising volume, an indication of buying support. This could underpin the index and take it to a new 2022 high.
The STI ended the week of Mar 21-25 at 3,413, and is now approaching the Feb 17 high of 3,441. The 3,441 level is likely to act as a resistance as it is an important high. Since quarterly and annual momentum are rising, the index should be able to reach and breach 3,441.
The initial part of the week was slow, with the STI consolidating after an earlier 182-point rally. The dip below the moving averages which took place near the last week of Feb now looks like a temporary blip. The March low of 3,148 has been established as support, but if the market stays resilient and strengthens, support should be moved up to the level of the rising 50-day moving average, currently at 3,314.
As the chart pattern develops, the break above 3,441 would indicate a new upside.
The STI has gained strength against the Hang Seng Index, which ended the week of Mar 21-25 at 21,404, off the week’s high of 22,154. Although the HSI remains below the 50-, 100- and 200-day moving averages which are - in turn - declining, medium term indicators suggest that the index may start to build a minor base. Support appears at around 20,550. As the HSI tests this level, it could stage a meaningful rebound.
See also: STI’s upside from breakout remains valid as risk-free rates fade, but stay watchful for FOMC
