(Bloomberg) -- Thailand’s benchmark SET Index may tumble to 540 after rallying to a “key resistance” level, according to Chart Partners Co., a technical analysis consulting firm in Bangkok. The measure climbed to 624.55 yesterday, the highest since Sept. 19, pushing its 14-day relative strength index to 79.4, above the 70 reading that prompts some investors to sell. The gauge may rise to 640 this month before plunging, said Chart Partners Managing Director Thomas Schroeder, who correctly predicted on May 7 the index would breach 600 by July.“The RSI is pushing to 80, which indicates the market can correct any time,” Schroeder said by telephone today. “The SET Index will have a big correction in the third quarter when the market will probably see about 100 points off the index.”
Thai stocks have surged 39 percent this year, after slumping 48 percent in 2008, on the expectation easing political tension and economic stimulus packages will boost Southeast Asia’s second-biggest economy. Overseas investors have this year bought a net 16.2 billion baht ($474 million) of Thai stocks through yesterday, compared with net sales of 162 billion baht in 2008, according to Bloomberg’s data. The likelihood of a reversal in the rally is underscored by a divergence, in which the relative strength index has declined from a 15-year high even as the SET index rebounded by 13 percent, Thomas said.The RSI has dropped since reaching 89.9 on May 13, the highest since November 1993. During that time the SET index has risen to its highest in almost nine months from 552.71.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.Relative strength indexes show how rapidly prices have advanced or dropped during a specified time period. Readings above 70 indicate a price may be poised to fall, and readings below 30 indicate it may be poised to rise.
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