Back in the channel

Hey all,

The last week or so has continued to be littered with slightly negative news from Japan and the Arab world. Nevertheless, most equity markets have staged a quick comeback. The local stocks are no exception, with the STI putting up 8% from its latest low of 2920 to close at 3187 on Friday. Some people are saying this could be a bull trap, since the rally is not supported by significantly high volume. As a chartist, I decided the best thing to do is to look at the charts, and determine if this recent rally holds water.

Below, you will see the chart of the STI, and a blue parallel channel. I have been highlighting this current pattern for weeks already. A few weeks ago, when the Japan crisis and Libya unrest made headlines, the STI dipped dangerously below the channel; and of equal importantance, the STI dropped below the 200-day MA. That made me worry a little; however, I decided to give the market some more time before I changed any longer-term views. The last week has seen the STI put in nice green candles, and now I can safey conclude that the stock market is back on track. Of course there will be volatility, but the STI has blasted back into its channel, and there is no reason why I shoud be concerned about any bull trappers. So I will keep this channel on my chart, and continue to look for upside in the short-term.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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