Singapore Straits Time Index Stock Market Trends June 19, 2008

I was looking at STI and Hang Seng to have short term technical rebound yesterday. I made the judgement based on the EMA envelope and STI was trading near the oversold region plus the bullish engulfing candlestick formation.

Well, the market did not ride up further today, instead, it formed a black candle. That’s not a good sign. The whole asian markets were influenced negatively by the DJ plunge yesterday.

Let’s examine the market from another dimension today.

I have been analyzing the market using Daily Chart. However, we can also look at it using a weekly chart. Weekly chart carry more weight compared to daily chart. The drawback of looking at weekly is slow response. Ask yourself, can you wait for a week without looking at the market trends if you are trader?

As trader, every day equal to money to us and so, we must treasure the opportunity everyday. I am a greedy person, that’s why I am looking at daily chart instead of weekly chart. Even though I do not make decision on weekly chart, we can still use weekly to buy insurance to lower our risk.

What do I mean?

Look at the daily STI chart below, we noticed STI was trading in the oversold region of the EMA envelope in March and now. Oversold shows the possibility of an uptrend in the near term. However, look at the weekly STI chart, there was an oversold signal in March but there isn’t any oversold signal in the weekly chart now.

Combining both signals, weekly STI chart shows oversold in both daily and weekly chart. The market indeed rebound and trend upwards.

At the current moment, weekly STI chart and daily STI chart does not talk the same language. The possibility of a strong uptrend is much lesser. There might just be a shadow technical rebound, and that’s it.

We live in the real world. That’s the unpredictability of the market and we have to live with it. Technical analysis gives us a basis to assist the decision making process, however, it is not fool proof. There is still chances of uncertainty in the market and we must always protect ourselves using proper money management technique.

I have learned something today, use weekly chart to validate the daily chart signal before making final decision!!!

DISCLAIMER: This information is used for learning purposes only. It does not constitute an offer or solicitation to buy or sell. You should do your own analysis on top of my postings.