Market Outlook for 29/03/2011

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As expected yesterday, STI did not manage to break the 200ma as resistance and bearish signal starts to appear yesterday. STi gapped down slightly yesterday and ended up weaker. The market infact went much lower during the day but bullish players came in and support the market before closing. However, the buying action was quick to be extingushed as sellers were very eager to take profit off the market instead. With increased radiation level from the Japan nuclear plant, and reports of wrong radiation reading from the Japanese authorities, would the market use this excuse to sell off their position?              
              
The candlestick formation that was formed yesterday is called the bearish harami. Bearish harami that is formed at the 200ma resistance level could be a strong bearish reversal signal indicating that price could go lower if there is confirmation. However, the 20ma line has been slowing creeping up recently towards 3030 level where it could provide possible support. Formation of a lower high to continue its downtrend now lies on how market is going to react when it reaches the 20ma line. If it breaks the 20ma without much hesitation, STi is likely to confirm its lower high and heads towards the immediate support level of 2970 without much hinderance. And this action could even break the recent low of 2920 level. If that happens, STI wil continue its downtrend. On the other hand, If STI struggles at 20ma today or tomorrow and did not manage to break it, it could indicate that there is a bullish underlying in the current action. This bullish underlying could be supported by the bullish divergence signal that is being seen in all the indicators.              
              
The banking sector yesterday struggled to hold their price above 20ma yesterday. All of them manages to and some even closed as a white candle. This shows that the bank’s support level is still holding very firmly. The offshore sector starts to experience profit taking as they have been the strongest sector around since last week. Bearish reversal candle starts to appear in Kepcorp and Sembmar indicating that profit taking could be seen for this few days. Sembcorp was surprising strongly probably due to the fact that it is trading at a strong MA support range.              
              
The properties sector took a hit yesterday as they are the second to reverse their trend. Citydev had it is hardest pullback as it had broke for a higher high last week. The market might be retracing to test their resistance turn support level. Lastly, the selldown was not very strong for the commodities yesterday but however, most of them closed the day with a bearish reversal candle. This could indicate that they might have some room to drop today. Most of them tested 20ma yesterday and seems to struggle to break it.              
              
In conclusion, it is likely that the market is going to retrace more today. But the key is actually the 20ma support level. There is a chance that market might not be able to break the 20ma (3030) level today and stay above this level. However, a break of this 20ma level would only means more selling is to be seen.  The sectors that might cause the 20ma to break would likely be the banks or the commodities sector. If any strong selling actions starts to be seen in either of the sectors. Do expect more downside to come. On the other hand, with a bullish divergence happening in the underlying, I would not be surprise that any selling would be quick to be countered by bullish buyers to prevent the prices to be dropping quickly. Hence, I am suspecting that any selling for today could be muted and 3030 level would remain as the key level for today. Shortist can carry on to look forward to short but must be really cautious and take profit fast when any bullish action comes. Longist is better to stay a side for now and wait for a bullish reversal signal.