The amazing support and resistance level of STI

For the last two weeks, I was quite amazed withmy predictions, not that I am very good but how reliable is the resistance and support lines for STI index.

Earlier on I have set a few numbers for support and resistance, 2,398, 2,451 and 2,585. These are derived from past highs and lows on major moves, dated Mar 2000(for 2,585), Mar 2005 ( for 2,398) and Feb 2006 ( for 2,451 ). For the last few weeks, these three points have been the main concern for STI.

On the day when Mount Merapi erupted, it was the first plunge of STI, the index opened below 2,585, which became the resistance to STI's move. It then closed and congested at the level of 2,451 before moving further down, then continued to be supported by 2,398. Even for the plunge on 25th May 2006, the stock climbed back to above the support level of 2,398.

These three points therefore have proven themselves as an important level at least for the moves this round. Presently the stock continue to hover at the level of 2,451. Is STI going to penetrate upward this time round?

The latest chart displayed a gap before STI reaching the 2,451 resistance, it then followed by similar moves for 2 days. This in effect is forming a break away candle stick pattern, when tomorrow drop in with a long bar downward, the formation would be completed and highly likely that STI will travel further south.

STI is revealing more and more indications of its intention, this is especially so with the deminishing volume. Not only that it is an indicator, its continual reduction has in effect prevented STI from punching through 2,451, which is supposed to be a minor resistance.

Further to that, both 21 days and 89 days EMA IS above STI, continue to press it down. So STI has to travel south, which is the path of least resistance. I won't be surprise if STI is not supported at 2,398 this time round. If we also look at the chart in a classical way, the formation still maintain a flag pattern although STI did tried to penetrate through the formation once. upon completion, STI will hit the next support level at 2,355.