Range-bound trading ahead for STI
SHORT-TERM stability has returned to the market in the past week as the Straits Times Index steadied itself near the 60-day moving average. Considering that the corporate earnings season is drawing to a close, we believe the index is likely to remain range-bound in the weeks ahead
Interest will likely gravitate towards companies that have delivered on the earnings front with strong growth prospects. Another factor to watch is oil prices, whose rising trend in recent weeks has been a debilitating factor to the equities market. While market watchers expect companies to perform better in 2H05, this scenario could be derailed if oil prices continue to trend up.
Observation of past trends suggests the market will slip into consolidation soon after oil prices break out into new highs. Thus, a good indicator to watch for the resumption of market momentum is a pullback in Brent crude prices.
Meanwhile, a range-bound environment is to be expected.
Support levels are:
- 2245 - start point of the long white candle formation on July 19.
- 2269 - the recent low touched on Aug 15.
Resistance levels are:
- 2319 - 38.2 per cent retracement level of the correction from 2400 to 2269.
- 2334 - 50 per cent retracement level of the correction from 2400 to 2269.
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