Market Outlook for 22/03/2011

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As expected yesterday, the STI rebounded but what wasn’t expected was a strong rebound. It gapped up strongly during opening and the bullish strength continued throughout the day and broke the immediate resistance level of 2960. As noted yesterday, STI is likely to close its gap resistance at 3010 – 3020 level which also confluence with the 20ma.              
              
Looking at its candlestick formation, STI formed a onewhiet soldier bullish dormation where it signifies a very bullish signal. This further reinforces the buy signal from MacD and Stoc. Hence, with all these bullish signal, STI should not have a problem testing the gap resistance of 3010 – 3020. Another observation is that the bullish divergence signal in the chart is starting to get more obvious. Hence, If this bullishness manages to break 3010 – 3020, there would still be hope that STI would turn into sideways or uptrend. We will see this scenerio again if STI is to test 3120 level. However, if STI did not manage to break 3010 – 3020 resistance level, we should see a lower high formation and downtrend could continue.              
              
The banks were pretty lack of strong bullish action yesterday except for DBS. Both Ocbc and UOB ended the day with a small white candle. But the whole banking sector did triggered bullish signal in their indicators. The offshores sector was pretty similar to the banks as they ended the day with a small white candle and bullish signals. But Sembmar was the particularly strong one as it closes above 20ma signifying that it can continue its uptrend. Hence, this is a counter worth to watch out.              
              
The properties was the best performer of all the sector as they appreciated strongly throughout the day.  They too had trigger bullish signals but I have notice that they are now trading very close to the 20ma as resistance. I am wary of chasing it and might consider closing positions if it reaches he 20ma. The commodities were also lack of strong bullishness yesterday as most of them struggled at the 20ma resistance level. Straits Asia is particularly interesting as it is now trading slightly above 20ma.              
              
In conclusion, the market might be having a technical rebound to close the gap of 3010 – 3020 before continuing its downtrend. But it is interesting to notice that the bullish divergence signal is getting clearer and confirm of the bullish divergence could only happen when STI breaks the gap resistance of 3010 – 3020 and goes higher to test 3120 level. It is a 100 plus points upside which seems to be very low probability for now. The bullishness yesterday was not very broadbased as most of the gains were contributed by the properties sectors. Hence, in order to see furher upside, my guess is that players of the market might be more actively looking at the banks or the offshores. The offshores in my opinion could be the prime pick. The strategy would remain the same and to stay sideline till it reaches the gap resistance before looking out for counters to short. However, in the light of offshores, bullish charts, we can also choose to look at the long side for the offshore sector. Sembmar could be the most interesting among the offshores.