With volatility in global markets receding, the Straits Times Index (STI), currently at 2,901, managed to hold at its 50-day moving average, currently at 2,892, up from 2,881 a week ago. The index had fallen below a minor support at 2,977 on Jan 25, and this level should act as resistance in the event of rebounds. The next support for the STI, should it fall through 2,892, is at 2,795. If prices fall towards this level, they would fall below the 50-day moving average, signaling danger for the component stocks. The 50-day moving average has acted as a support line for the index and if breached is likely to act as a resistance line.
Ironically, global markets, in particular US equity markets, appear to be inversely proportional to the “retail Reddit” stocks such as GameStop; AMC Entertainment Holdings, a cinema operator; and Express, a physical fashion retailer. These are the socalled old economy stocks which surged with the help of social media. Retail investors in particular should note that MUST Asset Management, a Korean-based fund manager that used to own 4.7% of GameStop sold all its shares following the surge last month, as announced in a filing on Jan 28.
The charts of these three stocks show spike-like accelerated upmoves followed by collapses. The trio are — GameStop, AMC and Express — are likely to find some sort of a floor from their precipitous declines. They are then likely to move sideways, within narrow ranges, probably losing strength against the broad market.
