I am quite surprised that the STI is so bullish during the past 4 days. The shortists must have been squeezed till they choked by now.
The chart above is the STI daily (click for bigger view) and I am using the Ichimoku Clouds indicator to “see” the overall picture. I guess most people are not aware of this Ichimoku indicator. First of all, I have to tell you that it’s NOT some secretive proprietary indicator. It has been around since 1969. Secondly, it’s not a holy grail indicator just because you are not exposed to it. I treat it just like a normal MACD, stochastic, moving averages etc. It’s very common for Japanese traders to use Ichimoku, just like japanese candlesticks which is like the de facto now.
At first glance on the chart above, it looks very busy and with a lot of lines like spaghetti. But if you know how to use and read the Ichimoku, it’s not complicated at all. Anyway, this post is not about explaining how Ichimoku works, but I will explain on why I think STI is bullish now.
The blue areas on the charts are known as clouds. If price is below the clouds, the clouds will be acting as resistance and if price is above the clouds, the cloud will be acting as support.
Also, if price is above the clouds it’s considered bullish and if below the clouds it’s bearish.
Looking at “A”, we can see that price has broken through the clouds, which means STI breaks the resistance today.
Is it a fakeout?
I believed not. Looks like a real breakout to me. The volume is relatively higher as compared with “C” ’s volume back then. Also the Chikou Span (green line) also broke through the cloud at “C” too.
There is also a golden cross at “B”, which is very similar to the commonly known moving average crossovers. Although in Ichimoku context, crossovers below the cloud is considered a weak bullish cross, the price is showing good momentum. So, I treat the golden cross as good signal as the cloud and chikou span breakout adds to confirmation.
The cloud shadows, which are clouds behind the price, will be the resistance ahead. 2,800, 2,830, and 2,870 will be STI resistance in the near future.
Price is approaching 2,800 level already and STI is already way overbought now. I expect a pull back soon. So, although I am bullish, I will not buy now. Wait for the pull back. If you are thinking to buy (long) on Monday, you are chasing… so it’s better to wait.
I am still vested in my S&P 500 position right now and looking into some STI counters next week.
The above information is just my personal opinion. I could be wrong and I am always wrong.