FTSE STI closed 3,007.19 for the week ended 16th April 2010 after hitting an intra-day high of 3,037 on 15th April 2010 and closing above the 3,000 level since Jun 2008. However, the market appears to be toppish in short-term and a possible pullback could be having.
The index has achieved a higher high since Feb 2010 but RSI has been doing a lower high since mid-Mar 2010. Stochastic signals also toppish since mid-Mar 2010. This has created a divergence and potentially lead to pulling back. The DI+ also starting to show sign of cutting down while the DI- cutting up. A crossover will create a divergence and if the crossover occurs with ADX signal rising towards 40, this will create a very bearish trend. Both the short-term and long-term GMMA signals have yet to show any sign of compression yet. If the long-term GMMA set of lines do compress, this will create a very bearish signal too indicating mid to long term investors are selling out. Meanwhile the still expanded long-term GMMA set of lines indicating the mid to long term investors are still vested and that could cushion the pull back.
The target of the pullback will be first testing the lower portion of the uptrend channel at 2,980. If that is able to hold, STI will rebound from there and continue the uptrend. If that level is unable to hold and the uptrend channel breaks, the next support region will be at the support region 1 ( 2,880 - 2,950 ) or even further down at support region 2 ( 2,740 - 2,790 ). A pullback to 2,880 from the high of 3,037 indicates a 5% pullback while at 2,740 this will be 9.8% ( approximately 10% ).
Investors/traders should exercise cautious now. If existing holdings at current price level have at least a +15% margin, this should have enough buffer for the pullback and shall not in the panic of selling out. For those without that buffer should consider locking in profit and observe for clearer signals to re-enter again.
Mid to long term investors could take the chance to slowly collect stocks with good fundamental at the 2 support regions.
