The STI fell out of a symmetrical triangle in mid Feb 2011.
It is currently facing stiff resistance at the area which is circled on the chart below.
As of today, it stalled at the first resistance (R1) area. If it can generate enough strength to move past R1, the second resistance area will be at the 50day MA at 3154pts. STI has to closed above the 50day MA in order to show that it can continue its uptrend.
Here's what is happening in the circled area: Investors who can't sell in time and had to hold their losses during the sell-off in first week of Feb 2011 would be scared stiff as they see their stock value plunged and will be anxious to sell off their current holdings when it comes back up to the circle area. IF there are NO buyers, this would cause another wave of sell-off as investors moved back into cash positions. If the first resistance (R1) area failed to be breached and the STI failed to hold the 200day MA, then we would expect the STI to drop to test its low at 2950 support area. A break of this level would set another wave of sell-off.
NOTE: A stockchart is not a crystal ball but it can allow a technician to look at the price action at the support and resistance area. Stock prices have the tendency to move to these support and resistance area to "test" if its firm before moving off in its desired direction. Technician are not able to determine the duration which the stock takes to reach the desired support/resistance area.
This is the beauty of the stock market, it is always a game of probability and always will be!
It is currently facing stiff resistance at the area which is circled on the chart below.
As of today, it stalled at the first resistance (R1) area. If it can generate enough strength to move past R1, the second resistance area will be at the 50day MA at 3154pts. STI has to closed above the 50day MA in order to show that it can continue its uptrend.
Here's what is happening in the circled area: Investors who can't sell in time and had to hold their losses during the sell-off in first week of Feb 2011 would be scared stiff as they see their stock value plunged and will be anxious to sell off their current holdings when it comes back up to the circle area. IF there are NO buyers, this would cause another wave of sell-off as investors moved back into cash positions. If the first resistance (R1) area failed to be breached and the STI failed to hold the 200day MA, then we would expect the STI to drop to test its low at 2950 support area. A break of this level would set another wave of sell-off.
NOTE: A stockchart is not a crystal ball but it can allow a technician to look at the price action at the support and resistance area. Stock prices have the tendency to move to these support and resistance area to "test" if its firm before moving off in its desired direction. Technician are not able to determine the duration which the stock takes to reach the desired support/resistance area.
This is the beauty of the stock market, it is always a game of probability and always will be!
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