The STI has come down quite sharply over the past few days. Will this be the start of a reversal in the uptrend or just a normal correction in the uptrend?
I attach a daily chart of the STI above for some simple technical analysis. The daily chart of the STI shows a steady uptrend since late May this year. It has steadily been making higher highs and higher lows. During the previous retracement in August, the STI retraced about 61.8%, and then proceeded to rally until 14 October. It has consolidated to about 61.8% fibonacci retracement. If the STI does not fall below the 61.8% mark (about 3100), then i would say that the uptrend is still intact. If history is to be a guide, the STI rebounded before reaching the 61.8% retracement. Let us see if this would be the case again. Also, the 50day moving average line also give a good indication of the STI's trend and looks like a good support level as well. During the previous retracement, notice that the STI did not really close below the 50day moving average. Now, the STI is approaching the 50day moving average. As long as the STI is able to close above the 50day moving average, i would say that the uptrend is still intact.
In my opinion, i would say that this appears to be a normal correction in an uptrend. But if the STI should breach the 61.8% fibonacci level or close below the 50day moving average, then the uptrend may have reversed and it may be time to pull out of long positions.
I will be watching the market closely and will update my thoughts on this blog if this should happen.
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