Market Outlook for 14/04/2011

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Yesterday, the Bulls had come back to the market with a vengeance causing STI to surge 34 pts within a day. This caught many by surprise as everyone was tuned to be in bearish mood and expected STI to fall further. However, this 100ma line proved that it is a strong MA support for STI. The big question now for many traders is whether this 34 pts surge is sustainable or not.              
              
STI’s movement yesterday caused the candle to end as a long white candle. After looking carefully at the candle, it is actually a one white soldier reversal formation. This formation is a very bullish formation as it tells us that the market participant is willing to buy at a much higher price than the previous day. Willingness to pay a higher price indicates confidence with the market. The indicators however, are still indicating bearish momentum but the Stochastic and MacD histogram is starting to narrow which is indicating that the bears are weakening. Therefore, if the bullish reversal candle is valid, there might be a chance for STI to test its recent high of 3188 level and might eventually break it and head towards the next resistance level of 3220. On the other hand, the market might still need some time to form a support level. If that happens, STI might retrace slightly today towards 100ma again and test it without breaking it.               
              
Let’s look at individual sectors to look for clues on whether the market is sustainable. The banking sector was very bullish yesterday primary lead by UOB and DBS bank. These 2 counters were picked out by me as a potential counter that would move yesterday. Today, they might be testing their previous high and might struggle to break it today. Slight retracement should be expected. The offshore sector was lack of bullish strength yesterday as they hover closely to their support level in an attempt to find a support. Sembcorp and Sembmar are now trading at their support level and their candles indicate that they might have a potential rebound.              
              
Next, the properties sector seems to struggle to be bullish yesterday as they either struggled to breakout or struggled to form a support level. Kepland and Capitaland are showing signs that they are trying to form a support level for continuation of uptrend. Lastly, the commodities did not show strong bullish movement yesterday. Only Golden Agri and Noble grp displayed bullishness. Indoagri, Wilmar and Straits Asia are still trying to find their support level and might a potential for rebound this few days.              
              
In conclusion, this strong rebound for STI does not seem to be sustainable as it is not really a broad based rally. However, numerous sectors are now ready to form a good support level and is staging for a good rebound which might break their previous high. As it is not a broad based rally, chance of retracement today might be high but the retracement should not be a heavy retracement. The max level it could retrace to is 100ma which is now sitting at 3137 level. I personally doubt that it can reach that level today as there are a lot of counters sitting on their strong support level.  Hence, I deem this slight retracement as an opportunity to accumulate long positions that had yet to rally and sitting at their support level. Hence, the strategy remains the same as yesterday but slightly more aggressive than yesterday. Go into long when the price fulfils the entry requirements. Avoid shorting and taking profits as potential of upside room is high.