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Sunday, July 3, 2011

The Straits Times Index

On the daily bar chart, STI closed exactly at the 200 MA on Friday. It is crucial to observe how STI react to this major chart point early next week. If it is able to break above the 200 MA, we can look forward for a retest of the ( thick black ) major downtrend line in the chart. This major downtrend line has been intact since December 2010 and has withstood 4 tests before. The bulls need a sustained violation of this major trendline to turn the market sentiment from bearish to bullish. Failure to overcome the 200 MA will likely see the index pull back to the 100 MA level, which is 3,095.

On the Point and Figure chart, STI has successfully breached the Bearish Resistance Line on Friday. In other word, the index is now above the Bullish Support Line or simply it has turned bullish. However, no fresh buy signal was generated yet. A fresh buy signal will be generated if ( and only if ) STI managed to hit 3,190.

Buy signal generated above the Bullish Support Line is considered strong and is meant to open new long. Buy signal generated below the Bearish Resistance Line is considered weak and is meant to close short position.

On last Thursday, a weak triple-top buy signal was generated ( below the Bearish Resistance Line ). The vertical count target was 3,210. Remember, this weak buy signal only tell us to close the short position. To initiate new long, wait for the strong buy signal when it is triggered at 3,190.

3,190 is where STI will overcome the major downtrend line mentioned above in the bar chart analysis. So both the Point and Figure Chart and Bar Chart analysis tally with each other. Point and Figure Chart is always known to be unambitious versus line, bar and candlestick charts!