Friday, August 23, 2013

Shareinv Article: 3 Things You Should Spot On STI Chart

Chart On Straits Times Index
1)    Lower High, Lower Low
A bull trend is usually identified by having a series of rallies where each rally exits at the highest point of the previous rally (higher high). The drop between the rallies ends above the lowest point of previous fall (higher low). We have seen this on the Straits Times Index (STI) chart since beginning of 2012 where the STI consistently formed higher highs and higher lows. However, a bear trend started when the chart started to form lower high and lower low. We saw the STI formed a high and lower high between June and August, and yesterday we just saw STI broke below the previous low of 3,066.
2)    Death Cross
One of the most popular ways technical analysts use to determine market direction is to use the classic “Death Cross”. A death cross forms when the 50-day moving average goes below the 200-day moving average. The terrifying drop for the past two weeks by the STI has led to the formation of the death cross seen on the STI chart. To many technical traders, this is a sign on an end of a long-term bull trend.
3)    Uptrend Channel Broken
Since October 2011, the STI started its rally from a low of 2,521 to a high of 3,464 and all this while, the STI was trending up in a big fat channel. Every time when there is a correction, we will see that the STI is supported by the long-term trend line. However, the fall of the STI in June 2013 hinted us on the bear trend, and now we probably need to be more cautious of the market as the “uptrend” is now obviously broken.