Shanghai In Distribution Mode

Shanghai market broke its 200 day moving average this week, moving into “Distribution” phase. Inflation is a big concern in China and it is using every means possible to keep inflation in check. This is putting pressure on the stock market as monetary tightening tends to hurt corporate earnings and put a brake on the economy.

The market regained 2700 level on Friday but in order to negate the bearish view, the index needs to break the down trend channel line which is at 2800 level. A break below 2700 gives a target of 2580 which acts as a support for this market.

The trend for the market is now in “Distribution” stage and it will move to “Bearish” phase if the 50 day moving average moves below its 200 day moving average. All eyes will be on the market next week to see whether the index is able to hold above its support level.

STI Up Trend To Continue

Singapore stock market staged a strong recovery in 2010. The STI index is up 10% year on year with the index moving from 2897.62 on 31 Dec 09 to 3190.04 on 31 Dec 10. With 2010 behind us, where is STI heading?

The phase chart is suggesting continuation of the current up trend. The index is now near its 50 day moving average. The 200 day moving average is still rising with a positive slope meaning that the long term trend is still intact. The support level is at 3100 level and resistance is at 3220 level. The index looked to be forming a head and shoulder pattern but the index was above to rebound near its neckline. The index now has to go above 3200 level to break the current trading range of 3100 to 3220. Once this resistance is cleared, the next resistance is at 3300 level. In the mean time, the bulls should have the upper hand. Remember the trend is your friend, and that friend is pointing to further upward momentum. Happy 2011!