Market Outlook for 18/03/2011

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Yesterday, STI did not manage to confirm the bullish harami cross, instead, it started the day with a gap down and ended up closing lower than previous day. The bullish reversal failed and STI failed to hold above 2960 level and whatever happened the day before could be considered as a whipsaw or a dead cat bounce. However, over the night, the DJI rebounded strongly and it could provide STI a boost on the rebound today. Will the rebound happen ?

STI despite the gap down yesterday, it manages to close as a white candle signifying the market is hold firm. This support is further reinforced as STI did not break the recent low of 2932. Judging from the indicators, there is a slight possibility that the bullish rebound could be happening soon. Hence, the key would be STI trading and close higher than yesterday’s high. Best case scenerio would be STI trading above 2960 resistance level. This scenerio would mean that STI confirmed its formation of a lower low and should be heading for a lower high. The lower high for STI should probably form at the gap resistance of 3010 – 3020 level. Therefore, this rebound could be capped.

The banks were lack of actions yesterday were generally lack of price action but they manage to trade and close at or above recent low. No clear sign of reversal was seen in this sector. The offshores had the biggest gap down yesterday but before market closes, they were quick to rebound towards previous day’s closing price. But nevertheless, they still did not manage to close at or higher than previous day’s closing. However, they ended the day with a white candle signifying that they still have bullish hope for a rebound.

The properties suffered the worst hit yesterday as some of the counters gapped down lower than the recent low. The worst hit was capitaland and citydev where they gapped down and struggled to close as a white candle. Eventually, they closed near to their opening price. The commodities sector is the firmest of all as they recovered the strongest after a gap down opening. Noble grp was particularly strong as it ended the day with a long white candle with high volume. However, it is now very close to 20ma and 100ma resistance. Which means that its upside could be capped by these MA resistance.

In conclusion, the market opened very weakly yesterday and struggled to hold its support. The whole day’s market action was flat and lack of trading activities. This signifies the indecisiveness for the market and participants of the market are unsure what to do next. Due to the overnight strength in DJI, traders might take the cue from the US market and trade for a rebound direction today. However, it is being observed that the upside would be capped at 3010 – 3020 level as the market has a higher chance of gap covering actions. The strategy right now is similar for the past few days where we would wait for a rebound towards the gap before we decide whether it would be a good position to initiate a short position.