Market Outlook for 20/04/2011

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STI broke 100ma yesterday without a sweat as it gapped down strongly in the morning as the US market suffered a sell down in the previous night. This had caused STI to test the major support level of 3120 which was pointed out since last week. During the day, STI had briefly broken the 3120 level and buyers came into the market to bargain hunt which creates a rebound before the market closes. The key now is whether STI would stay firm at this major support level of 3120 level or it can break the level and heads towards the next level again?              
              
STI formed a very interesting candle yesterday which is called a dragonfly doji. It shows that the market is indecisive about it direction but it gives a hint of bullishness as it has long lower shadow. Coupled with the major support level of 3120, this dragonfly doji indicates that this support level could be strong as the market refuses to close below the support level. If the market gaps up today and close as a white candle, there might be a chance to form a formation call morning star which is a very bullish reversal formation. Looking at the indicators, they still remain bearish and are heading lower without signs of bullishness. RSI is now close to the 50% mark and Stochastic is nearing oversold. Bearish strength is still there buy might be getting limited. If STI continues to be bearish and breaks 3120 level, the next possible support would be 3080. Would 3120 level break? It all depends on the respective sectors.              
              
The banking sector continued to suffer sell down yesterday. The only bank that stay firm at it 20ma support is DBS bank. It ended the day with a white candle. Next, the offshore sector; the offshore sector continue to consolidate at their support level and was not affected by the sell down. This shows that they had already found their support level and might be ready for upside movement when there is confirmation.              
              
The properties sector went a nudge lower as they were still struggling to find a foothold on the support level. Capitaland’s chart seems to be interesting as it is now at a strong support level. However, it is now trading slightly lower than 20ma. If it breaks above 20ma, further upside strength should be seen. The commodities sector is the most interesting sector yesterday as it gapped down pretty strong during the market opening. During the day, they also suffered sell downs but interestingly, bargain hunters came in and snap up the shares and caused most of them to close as a white candle with lower shadows. This long lower shadow is most significantly seen on Straits Asia. The rest of the commodities also formed a bullish reversal candle yesterday. Hence, the commodities could be the key sector for 3120 level to hold.              
              
In conclusion, STI might have a lesser chance to break 3120 level today as most of the sectors are forming firm support level and there are indications that they can’t break their support levels. The commodities sector should be the key sectors today to push the STI above 3120 level. However, for the upside to be sustainable, the rest of the sectors must also continue the bullish momentum. The current drag for the market is most likely today be the banking sector. The strategy now is to accumulate long positions for those whom did not have a chance to long last week. Those whom already had long positions; it would be wise to hold the position for a while longer. Shortists again are best to avoid the market.