During the week, the Straits Times Index broke out of its thrice tested resistance at the 3,250-3,255 range setting an upside of 3,360. Usually, breakouts of this ilk are followed by temporary consolidations or retreats before prices continue their uptrend. A word of caution: there is some negative divergence displayed by short term RSI and the STI. Additionally, quarterly momentum, while still on an uptrend, has turned down temporarily.
These oscillators suggest some consolidation ahead of any further upmove. Week-on-week, the index had gained 100 points to end at 3,280. During the week, the STI touched a closing high of 3,293 as it formed a minor top on the candlestick chart. Any further retreat should find support at 3,250 at which level the breakout remains good and the upside remains valid.
Much depends on the 1Q2024 results of DBS Group Holdings which reports on May 2. If it betters the analysts’ estimates of around $2.465 billion would trigger a further rally in the market.
Elsewhere, proxies for China A shares are looking a lot better. The Lion-OCBC Securities China Leaders ETF, which replicates the movement of the Hong Kong Stock Connect 80 Index, had broken out of a reverse head-and-shoulder base formation at 42 cents on April 1, indicating an upside of 60-62 cents. Since the breakout, prices eased before resuming their upclimb. It appears that the China Leaders ETF is likely to get to its upside target before any consolidation materialises.
See also: STI steadies despite overbought US markets and rising US risk-free rates
