The Straits Times Index has been hit by the sell-in- May- and-go-away trend. It appears, however, that after falling almost 145 points week-on-week, the index may actually find support shortly, at the confluence of a support area at 3,050 and its 100-day moving average at 3,040. The original breakout took place at 3,070 and this should have provided some support, but has failed to do so.
Technically, the chart pattern shows the STI broke below a thrice tested support at 3,150 and its 50-day moving average at 3,140. The chart pattern also indicates that prices formed a minor top, and the downside from the break which took place on May 12 is 3,040.
Any rebound in the week of May 17-21 is likely to be temporary as quarterly momentum is easing; the 21-day RSI is falling and at 37; stochastics continues to fall, and ADX is flat. The DI, too, have turned sharply negative.
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A sustained recovery by the index is unlikely, and it may only materialise during the northern hemisphere’s summer months, when there is sometimes a traditional summer rally. As a result, the STI may fluctuate in a lower bound of 3,040 (if it holds) and 3,140 for the rest of this month.
See also: STI’s upside from breakout remains valid as risk-free rates fade, but stay watchful for FOMC
Property stocks are likely to stay weak as they had started to ease at the end of April. The banks are mixed, and conglomerates such as Keppel Corp which had attempted to rally, has failed to do so.
See: Investors take umbrage with SPH’s restructure by selling down
Singapore Airlines, which peaked at $5.70 in April, is likely to find support at the $4.08 to $4.18 range. Its quarterly momentum is falling but may encounter support at its equilibrium line.
See also: Continued steps towards a Chinese New Year rally
Elsewhere, iFast has gained strength against the market by trading in a narrow range. Its support appears at $6.13, at the four-times tested 50-day moving average line which has acted as support and continues to hold. It may continue to stabilise prices. Note, though, that a break below this moving average would send a negative signal.
Most of the blue-chips and aspiring blue-chips such as iFast are relatively liquid. The danger for investors and traders is in penny stocks and illiquid stocks such as OUE and Hong Fok. These peaked on April 14, and March 26 respectively and are likely to continue their journey south. Most recently, Catalist-listed LHN peaked on May 11 and formed a minor tweezers top on the candlestick chart.
