Market Outlook for 06/04/2011

*Disclaimer: This material is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to purchase or sell the product mentioned. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks. If there is any questions, please contact me (Jay)              
              
Yesterday, STI manages to trade above 100ma slightly and tried to trade higher than 3150 resistance level. However, before the market closes, profit taking sentiment came in and took the gains of the market. This last mintue selling was mainly caused by the weak opening of the Europe market and this is the main reason why traders flee the market to avoid overnight positions. Would the expected retracement starts today?              
              
STI ended yesterday with a white shooting star. Shooting star indicates bearishness but it requires a confirmation candle. The confirmation candle needs the next day to trade as a black candle and trades lower than yesterday’s low. Hence, this white shooting star can be deem as the bull is weaking and this increases the probability of retracement. Looking at the indicators, they are still indicating bullish indication and also in the overbought condition. Stochastic has start to form a bearish crossover indicating that the short term bullishness may come to an end. Hencefore, chances of a retracement is really high now and what is needed is just a black candle confirmation for STI. Retracement target would be support level of 3120 or 3080. 3080 would be a stronger support level to target at.              
              
The banking sector as usual struggled to stay at their current level and ended the day close to flat. Both Ocbc and DBS are showing bearish candle at the resistance level. The offshore sector also displayed bearishness as they formed bearish reversal candle yesterday. Kepcorp would be one to watch out for as it formed a bearish harami with a black shooting star. If it trades lower than 12.40 today, there is a good chance that it could retrace back to support of around 12.18 level.              
              
The properties were pretty mixed yesterday as some of the counter showed strength but some did not. Capitaland and F&N continued to be bullish but Citydev and Kepland struggled to hold their ground. They might continue to have mixed sentiment today. Lastly the commodities, they suffered the strongest selling pressure among the sectors yesterday. Both Indoagri and Goldenagri suffered a strong selldown, causing them to be back to their breakout level which could not be a possible support level for them. Hence, their support level would be confirmed if there is any bullish candle formation. If there is, it could be a possible counter to buy on the long side.              
              
In conclusion, STI had indeed test the 3150 level and is showing signs of trouble breaking the resistance level yesterday. Confirmation of reversal is when STI trades as a black candle and lower than 3140 level (100ma). Numerous sectors are showing bearish signs and among all the sectors, the offshores or the banks might be leading the retracement for STI. ANy downside should be supported by either 3120 or 3080 level with 3080 level as a stronger support level. Hence, the best strategy right is to look forward to take partial profits and avoid taking new long positions. Shorting is best to be avoided as downside is pretty limited and it would be a counter trend. Let’s hope a proper retracement happens and good setups for long trades could be seen in the next few days.