Friday, April 8, 2011

STI: Still going strong

On Friday STI closed at 3187.31 , the 8th consecutive day of gains, and 13th positive day of the last 15. The gain from the yearly low on March 15 of 2919.98 is 267.33 points or 9.15%. The index is still some 3.8% below the 9 Nov 2010 high of 3313.61. It is also worth noting that April is quite a bullish month for STI with 7 of the last 10 Aprils resulting in gains.

The top blue line on the chart shows where STI is at now.

Indicators are nearing overbought territory with the RSI near 70 and closing near the upper bollinger band. However today's close at the high of day shows the bullish strength of the rally and indicates that the index could even move past the 3200 level after a correction.

I am expecting a brief correction for STI to the 3120-3150 region. Support at 3110-3120 should be especially strong as 3110 is the neckline of the double-bottom pattern and 3120 has been tested successfully before. In a more bullish scenario STI might only correct to 3150, consolidate and resume trading in the next band at 3180-3220. Stronger resistance is at 3220. A good thing is that there are no negative divergences..

Strategy: Reduce holdings as STI is currently overbought and refrain from taking more long positions until there is a correction.

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