STI proved me wrong by rallying 4 consecutive days to close above 3180. This happened against the backdrop of a renewed aid plan for Greece, bailing out the time bomb yet again. It is hard to make sense of the constant 180 degrees change in fundamental sentiments, but the charts paint a clearer picture. It seems like STI has formed a new channel, indicated by the bottom most support line that i have newly added. The validity will be confirmed by a downside move next week due to upper channel resistance.
The usefulness of this information is that a monday/tuesday closing above 3180 invalidates the new channel, making it a clear case to go long on the index. Otherwise, i maintain my bearish stance on the index. The volume is higher than normal, so it does indicate strength in the rally. To sum it up, long above a higher monday/tuesday close depending on trader comfort, or wait for a setup to short should the next few days go into consolidation.
The meaning of the analysis may appear obvious at the surface level, but it does reflect the underlying principle of technical analysis; to let the market tell you where its likely headed, through the indication of lower/higher trading prices.
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