(Nov 8): Although the Straits Times Index retreated on Nov 8, the rally should be able to resume. On Nov 2, the index had broken above its 200-day moving average at 3,226 accompanied by expanding volume.
Chart 1: STI with moving averages and momentum
Quarterly momentum remains strong after breaking out of its own resistance and equilibrium line. The 50-day moving average is also rising.
Chart 2: Short term indicators
The 21-day RSI is approaching the top end of its range but its trend remains upwards, and there are no signs of negative divergence yet. Short term stochastics also continues to rise. ADX is rising. However, +DI has flattened, a sign that a temporary pause in the uptrend is likely.
Any retreat is likely to meet with support at 3,225 to 3,226. When the upclimb resumes, resistance appears at 3,380.
Hongkong Land poised to break out of base
The chart pattern has the appearance of a textbook base formation. Whether prices can fulfil their potential remains to be seen. Prices are forming a double bottom, with the neckline resistance at US$5.72.
A successful breakout should materialise, following a strengthening by quarterly momentum. If momentum breaks above its own resistance and equilibrium line, a price breakout by the stock is likely.
A successful breakout indicates a target of US$6.36. Support is at the flattening 50-day moving average at US$5.56.
