ST Index

STI breaks trendline- 2560 beckons

The STI has broken a major uptrend line for 2 consecutive weeks and has also broken below prior support level at 2746, a level which the index managed to hold for 7 months. Banking stocks which has outperformed the index over the past 2 months are especially at risk. We believe at the very least banking stocks could retest January lows.

For the STI, this trendline break is significant as it marked a 4 year uptrend and by extension the larger uptrend from 2003 low of 1205. Given, the index's break below the trendline, the next support will be towards the 50% retracement of the advance from 1205–3905. This provides a target of 2560. The attached chart shows a clear trendline break and the blue horizontal line represents the 50% retracement level. Wave analysis suggests a deeper decline could be unfolding. However, near term focus remains 2560.

We recommend selling banking stocks and adding shorts at $18.20–18.30 for DBS and $8.10–8.20 for DBS. Other short candidates are Wilmar and SGX. Potential downside for Wilmar is at $2.60 and SGX at $5.00.


STI weekly chart

Source: Nextview


STI in an extended wave 5

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