Market Outlook for 12/04/2011

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At last, after 8 sessions of up days, STI might have started to retrace to form a higher high. STI opened with a gap down and ended 27 pts lower indicating that STI might have whipsawed 3180 level on friday. How far will this retracement be? Will it be a shallow one or a deep one?              
              
STI closed as black candle yesterday which end up as a one black crow bearish formation. This formation is a strong formation as the gap down in the opening indicates the bearishness and on top of that, closing lower than previous day low added the bearishness. The bearish strength might continue as the indicators like stochastic had indicated bearish readings. Its overbought condition is starting to decline as the price just started to retrace. Currently, there is a 100ma below which might provide a good support level at 3137 level. This could be a possible level where STI could get supported. But a much stronger level would be 3080 – 3120 level there there is a multiple confluence of 3 MA lines with horizontal support level. I doubt that level would break.              
              
The banking sector was not spared yesterday as most of them ended up with a long black candle. Ocbc bk was the only expection as it ended as a black long legged doji at 100ma. This candle indicates its stubborness in breaking the 100ma level. The offshore sector which has been the key sector for STI’s bullishness suffered a selldown. The worst hit was Sembcorp where it formed a long black candle with long upper shadows. This indicates its reluctance to go higher. However, Sembmar was behaving differently as it ended the day as a doji and did not break lower than past few days low. There might be a chance that it might do catching up.              
              
The properties sector also did not manage to maintain its bullishness as most of them starts to form a bearish reversal candle. Worst of the sector is Kepland where it ended the day with a long black candle confirming the 100ma resistance. However, it is now much closer to 20ma as support level and could be reversing there. lastly, the commodities did not manage to avoid the selldown. Noble grp, Olam and Straits Asia was quite badly hit yesterday. However, one clear observation is that some counters like Olam, Wilmar and Goldenagri, they are now trading at MA as support level and could be a reversal point there. I will not be surprise if the reverse quickly.              
              
In conclusion, STI’s drop currently is indeed broadbase and the selling strength might continue today. Immediate possible support level is at 3137 level while a strong support range is between 3080 – 3120 level. Some individual counters in the respective counters might not be subjected to be a selling target today as it has already trade close to their good support level. (Commodities sector) However, some might still continue as they are still quite far from their support (Offshore sector). Hence, the bearish market might be pretty mixed and now as worst as yesterday. As the downside now is limited, shorting should be avoided. Profit taking or position reduction would still be in the mind but not aggressively anymore as the market had already retraced. Long position traders now can get ready and prepare their bullets for positions when the counters show signs of bullish reversal. Be patient and the opportunity for long side is coming very soon.