Market Outlook for 05/04/2011

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STI went a nudge higher yesterday and tested 100ma. This movement has confirmed the higher high movement on friday. Hencefore, STI is now trading as an uptrend instead of a sideways. It is great news to many traders on the long side. Many shortist should be fleeing the market yesterday causing more bullish strength to the market. Cautious traders currently would be starting to be attracted to the market as the trend has changed. However, due to the fact that the market did not have a proper retracement, these cautious traders should be planning to buy on dips or retracements. Would there be an opportunity for the market to retrace or this bull is going to be a crazy bull charging higher?              
              
Since STI is now trading at a higher high level, there is a need for STI to form a higher high and higher low in order for it to have room to trade higher. STI is currently trading at 100ma and close to a horizontal resistance of 3150 level. This resistance could be a strong one given that it confluence with 100ma. Looking at the indicators, RSI just managed to trade into the overbought region and Stochastic is also in the overbought. This could carry on to indicate strength but if there any formation of bearish candle, the tides might change. Currently, the STI is still a white candle but significant smaller than the previous day. Hence, the bull is showing signs of weakening. The indicators have yet to show any bearish signal for the short term. Hence, if STI forms any black candle at current level, it should start to show bearish signals in the indicators. If this happens, it would indicate a possible retracement to the breakout level of 3120 or even 3080 where there is strong confluence of 50 & 200ma. This 2 levels would be a good level for a higher low formation.              
              
The banking sector struggled to trade higher yesterday as most of them ended the day like a long legged doji. Long legged doji signifies strong indeiciveness in the market. Ocbc bk is now obviously trading at 100ma resistance as it closes with a black candle. Retracement should be expected in the bank sector. The offshore sector is the strongest sector among all as they are responsible to hold STI firmly on the bullish side. Kepcorp and Sembmar had a breakout for the year’s high. Sembmar particularly is now trading at historical high level. Sembcorp is just a nudge away to break its resistance level. Their bullishness could continue today as their candle have yet to show weakness.              
              
The properties were also contributors to the bullish market yesterday as some manages to trade towards the previous. Citydev and Capitaland is now trading slightly higher than their previous high level. Kepland and F&N however are trading at 100ma as resistance. Do carry on to expect mixed movement for the properties. The commodities sector carried on their bullishness yesterday with Noble grp and Indoagri breaking out of their previous high. This actions confirms their uptrend. However, Wilmar, Golden Agri and Olam is still struggling to break their resistance level. Again, do expect mixed movement in this sector.              
              
In conclusion, STI’s up side for short term is getting more and more limited as it approaches a strong resistance level of 3150. One should be cautious on the long side and it would be best to within buying on the long side. Because chances of retracement is getting higher and upside is getting limited. The offshores, properties and commodities might carry on to push the STI a nudge higher, but I do not expect them to break their respective upcoming resistance level. Therefore, the best strategy for now is to be very selective on counters to buy for long. Avoid chasing further breakout should be the key. Traders with long position that had bought 1 – 2 weeks ago should start to take some profits so as to prepare capital to pick up shares if a retracement happens. Shortist is best to avoid the market for now although retracement chances is higher. This is because the bears had yet to take over the market.