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Tuesday, August 17, 2010

Straits Times Index - Candlestick Chart Analysis

STI hits 3,043 on Aug 3 and reversed from there forming a double top chart pattern between April 15 ~ August 3.

In the upcoming weeks, we need to watch the extend of the retracement. A break below the thick blue trendline ( confluence by the 200 SMA ) at around 2,820 suggest further downside to the bottom of the broadening formation ( around 2,600 ).

Conversely, if the index is able to bounce back up and surpass 3,043. Sentiment will turn bullish and will be looking at a target of 3,280.

At the moment, it may be wise to stay at the sidelines to see how the market resolves itself. New long can be added when the index survived the test of the thick blue trendline!


Monday, August 16, 2010

Hindenburg Omen

The Hindenburg Omen is a technical analysis indicator that is said to portend a stock market crash. It is named after the Hindenburg disaster of May 6, 1937, during which the German zeppelin Hindenburg was destroyed.

Lately, there is emerging sign of the occurrence of the Omen :

See here
And here
And here

The most recent occurrences were on Aug 12 & 16, 2010. However, one signal alone is always considered to be an unconfirmed signal. A series of 3 ~ 5 signals are preferred to be considered a confirmed signal.

Hindenburg Omen's performance from 1985 ~ 2005 :


Sunday, August 15, 2010

Straits Times Index - P&F High Pole Forming

A pole is a long column of Xs or Os with a column of Os or Xs alongside. For a pole to occur there should be some sideways consolidation prior to the pole. Usually there is further sideways consolidation on the other side of the pole before the pattern breaks.

Most chart patterns in Technical Analysis should not be anticipated because the final signal from a pattern may never come, so it is best to wait for it before acting. High and Low Poles are different. It is possible to act while the pattern is being formed. The common strategy with a high pole is to sell when the reversal column of Os retraces 50% of the X column length ( which is now ).

Poles are not infallible ! This post serves to point out such a Point and Figure setup that exist but the final signal depends on how the market unfolds itself..... It is too early to give a price target amidst the pole that is yet to complete.

This post is about the medium term view of STI ( 3 ~ 6 months ). It is not about how STI will move tomorrow or next week. After 6~7 successive losing streaks, there will be no surprise for a technical rebound next week. But what come after the rebound...?

Finally, a video ( Robert Prechter's interview with Bloomberg ) that should worth 10 minutes of your time: Click Here
And the article from EWI : Click Here

Reference material :
The Definitive Guide to Point and Figure by Jeremy Du Plessis ( An Excellent Book )


Tuesday, August 10, 2010

Hang Seng index ( HSI ) [Updated]

HSI hits the thick blue downtrend line and retreated by 328 points or 1.5% today. It is looking set to head toward lower boundary of the downtrend channel. First support 21,000, second support 20,600, critical major support at 19,350.

Apart from the Dow Jones Industrial Average ( DJIA ), The Hang Seng Index ( HSI ) is the next most influential index to STI.

[update] Just read the blog of Colin Twiggs ( HERE )... It is interesting to note that we both share the same view on 2,920 being an important level to watch for STI.


Tuesday, August 3, 2010

Straits Times Index

The probable Head and Shoulders pattern I suspected was forming is invalidated. However, STI has reached the resistance of the last significant high ( double top ? ). If it is able to overcome this resistance, we will be looking at the upper end of the broadening formation confluence by the white color resistance line ( around 3,280 ). Failing which, we will see the index diving toward the lower boarder of the broadening formation.

On the Point and Figure chart, STI has just broken above another column of X giving a fresh bullish buy signal. However, the current column of uninterrupted X looks set to turn into a high pole which has bearish implication.

To conclude, if STI is able to break above the resistance of the last significant high, we will be looking at 3,280. Conversely, if STI reverse from here. We will need to watch the extend of the pull back. Once 2,920 ( 50% of the high pole ) is taken, chances is that the high pole formation is getting real. When that happen, STI may run the risk of heading toward the lower boarder of the broadening formation.

I made a request to Collin Twiggs at IncredibleChart to include STI in his analysis. Today, for the first time, Collin has included STI in his blog. However, he told me he may not be able to do that on a weekly basis, probably on ad hoc basis. His analysis can be found from here