Double Peak or Head and Shoulders?

June 29, 2010 § Leave a comment

Straits Times Index 29th June 2010

STI along with the global market, headed south.

For STI, this appears to be the initial phase of the confirmation of a medium term downtrend.

Technically, everything looks bearish :

1. Stochastics has just turned down from overbought region, implying that this is just the beginning.

2. Momentum is starting to move down to cross the zero line, implying the beginning of a downward movement.

3. GMMA shows the crossover is a false breakout, when coupled with stochastics. GMMA is likely to cross down again.

4. The formation of the 2nd peak is almost complete.  A double peak is very likely to occur. The downtrend line formed by these 2 peaks will serve as a very strong resistance.

5. Index has just touched the 50 and 100 moving averages which served as a support level for the past few sessions. This is likely to break with the beginning of the downward move.

7. To make matters worse, with this break, the 5o and 100 moving averages will definitely make a cross, implying further longer term bearishness.

8. Today’s drop is accompanied by high volume.

9. The neckline at 2783 which is 50 pts away only, if broken, will complete the bearish head and shoulder pattern.

The technical rebound has finally come to an end. All these indicators provide a very clear signal for traders. The index is expected to be heavily sold down as this is a 2nd chance for anyone who wishes to bail out. More bulls will be converted to bears at this juncture. It remains to be seen if support levels are able to halt the fall.

Expect to gap down in the morning. Any recovery presents a chance to short. Keep stop loss at 2833, the closing for today.

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