Market Outlook for 29/04/2011

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STI opened strongly yesterday as DJI ended with a strong note over the night. However, selling strength came in after HSI opens. HSI lead STI for the whole day and STI eventually ended the day with only 2 pts higher than the previous day. Traders were starting to get frustrated as the market’s buying momentum can’t sustain for the day. Will today be a better day? Since this coming weekend is a long weekend, would traders get out from the market by selling?

STI formed a 4th black candle for the past few days. This formation shows the reluctance of the bears to give way to the bulls. A positive note to this formation is that yesterday’s closing is higher than previous day giving some hope to the bulls. Based on the indicators, they are still trading in the bearish momentum and yet to show any good signs of bullishness. Therefore, selling strength could persist and STI might carry on staying at the resistance turn support level of 3180 or even head towards 20ma.

The banks continued to trade horizontally as it struggled to find strong reasons to break the support or even the resistance level. This kind of movement is likely to persist till it manages to break out the resistance level. The offshore sector had a strong performance yesterday morning but its bullish strength was quick to be suppressed by the selling as traders decided to lock in the profits in this sector. If this sector is trading lower than yesterday’s low, we might see offshore to continue to retrace towards the 20ma or their respective support level.

The properties yet again hovered sideways for yesterday as they struggled to find clear direction. Their Bollinger band is getting narrower this time round and therefore, chance of breakout movement can happen anytime. The commodities had a very mixed movement yesterday but generally ended the day with a black candle. Selling strength could persist but their support levels are holding very well. Most selling would only come in if their support level breaks.

In conclusion, based on the readings and observations in the chart, STI might continue its sideways movement today as the sectors shows that there is lack of catalyst to surge higher. Most of the sectors are not trading in a very narrow range of support and resistance level. The only sector currently that might pull STI down is the offshore sector. However, the downside for the offshore is very limited. Hence, the downside for STI would be limited too. I am expecting STI to have a good chance of testing 20ma level again, which currently is around 3160 level. Staying above this level would mean that STI’s uptrend would remain intact. Cautious trading strategy should be adopted currently. Adding long positions is not encouraged as it might not yield good risk reward currently. The theme should be holding on with the current positions or reducing if your portfolio exposure to the market is high. Shorting should be avoided too. Therefore, it would be wise to stay sidelines for the moment.