STI dropped 80 points within 3 days and landed exactly on the supported at 3,125. For those who had shorted intra-day, Good for you. As a risk management technique, do cover most of your short positions before the FOMC announcement as news play is always risky.

If things decided to turn real bad after the FOMC announcement, the further drop will be quick and fierce. After some analysis, the next few supports level are indicated in the chart. Look for market reaction near the support and resistance.

Update on 22 Aug 13 @1.45pm
STI gap down and is trapped within the support 2 zone of 3,065 – 3,080. This shows how accurate is the support.
Looking at the rate, the support 2 will likely be broken soon.

Due to the concern of QE tapering, the STI ended the week with a breakdown below 3,200, below its trading range. However, the candlestick seems like a doji with indecision on Friday 16 Aug 13. It is good to observe for a couple of days more next week to ensure no false breakdown due to market over reaction to news. If it is false breakdown, one may enter for buying opportunities. However, if the breakdown is confirmed, then the next support will be at 3,125. Short term traders will need to exit their trading range play. Aggressive traders can go for shorting intra-day while more conservative traders can wait to see how the index react near its next support.

STI is reaching its target 1 at around 3,265 – 3,280 pretty soon. Last Friday (12 July) had some profit taking activities. The immediate support is at around 3,205 – resistance turn support. If the index is able to clear target 1, then we are looking at target 2 of around 3,340. Depending on the strength of the index, there are likely to have some consolidation along the way.

If the immediate support is respected, any retracement near to the support is a buying opportunity. You will need tight stops in the current climate of QE tapering.

The bank counters have moved up. Based on sector rotation, other fundamentally good counters are likely to move up after formation of patterns and breaking of resistance. Look out for it. Some analysts asked their clients to watch out for SembCorp Marine, Keppel Corp, SIA, REITS, First Resources, Indo-Food Agri, which are either forming their base or testing resistance.

My take – Trade cautiously and do have a trading plan.