FTSE STI closed 3,192.18 on 7th Feb 2011, first trading day of the Year of Rabbit. Despite the drop, as a whole STI is moving within a symmetrical triangle formation with its apex at 3,240. 3,120 also served as a triple based support. Unless there is a breakout or breakdown from the triangle formation, STI short-term wise will be in range bound mode, moving within the triangle formation.
Looking at the long-term GMMA lines, they are in compressed mode indicating long term investors are selling. Unless the long-term GMMA lines are trending down in expanded mode, STI can yet to be concluded to be in downtrend. The compressing of the long-term GMMA lines merely indicating long term investors buying and selling at present level. Two possible scenarios could develop :-
1. Long term buyers able to absorb the long term selling pressure and after that long-term GMMA lines will expand in uptrend, STI breaking out of triangle formation and resume uptrend.
2. Long term sellers outnumbered long term buyers and long-term GMMA lines will expand in downtrend later and STI breakdown from triangle formation and establish a downtrend.
Technically, symmetrical triangle is a continuation formation that is will resume the same trend previously. Prior to the formation of the symmetrical triangle, STI was in an uptrend and hence possibility of breaking out and resume the uptrend. A breakout from symmetrical triangle formation could indicate a potential target of 3,400 for STI. Whereas a breaking down would see downside target of 2,900.
From the fundamental point of view, there lacks catalysts for STI to move up/down. US economy though recovering but employment situation still uncertain. European debts after Greece and Ireland bailout, investors are looking at whether Spain or Portugal could be the next. The recent Egypt riot incident is a consequence of rising inflation in which Asian countries are facing presently. Constant and aggressive cooling measures could be expected for 1H2011 from Asian countries and by doing so, economic growth could be traded off for it.
