Market Outlook for 4/5/2011

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After 5 days of weak movement for STI, STI at last had a very clear and decisive downward movement yesterday. Its price action broke the 20ma line decisively without much chance for a rebound during the day. However, the trading volume is still lacklustre. As pointed out yesterday, 100ma line would be the key level to watch as it could determine if STI would remain as an uptrend. Will this 100ma line be supported?

STI formed a long black candle yesterday and it closed below 20ma line. This indicates that the bearish momentum might continue till today. Its lower shadow formation gave a slight hint that buyers might be coming in to support the 100ma. But we cannot be quick to conclude that as the price has yet to test the 100ma line. Looking at the indicators, they still remain bearish and have yet to show signs that reversal is possible. Therefore, STI might continue to test the 100ma line which is currently at 3137 level. Breaking of this level would mean STI’s uptrend would be compromised and we would be looking forward to the next support level of 3100 level.

The banks suffered the selling pressure yesterday as they continued to trade lower. UOB which was pointed out yesterday is now trading exactly at the 20ma level. DBS had also tested the 20ma line and is now trading slightly above it. Ocbc’s trend seems to be starting to form sideways as it is now trading very close to the previous low. The offshore sector suffered the most yesterday as oil prices retreated. Kepcorp and Sembcorp have managed to retrace to 20ma level and closed at or near the 20ma line. However, Sembmar broke 20ma and is now trading below it. If both Kepcorp and Sembcorp follow Sembmar, we might see a good chance that both of them might not hold the 20ma line.

After the prolonged sideways movement in the properties, some of them broke their support level and start to trade lower. They are Capitaland and Kepland. Kepland was the worst of the lot as it close below all the MA line. Its trend could have turned into downtrend. Citydev & F&N are struggling to maintain their sideways support. My personal guess is that they might follow Capitaland and Kepland today. Lastly, the commodities were the second worst performer yesterday as they continued to trade lower yesterday. Indoagri had one of the significant drops as it continues to trade lower so as to achieve a lower low. All of them are now trading below 20ma and might continue to trade lower.

In conclusion, STI will still continue to trade lower as most of the sectors failed to hold well at their respective support levels. The only hope from revival of the bullishness is either the bank sector or the offshore sector. Commodities and properties would carry on as a drag for STI’s upside. 100ma line which is at 3137 level would still be a support level but this level is what to watch out for today. If it breaks, we should bid farewell to whatever bullish expectation we have since the past 4 weeks. STI would turn sideways if 3100 level is tested and successfully rebounds of. Anything lower than that would mean that downtrend is formed. The best strategy right now is to stay sidelines and hold as little long positions as possible. Cut loss if necessary. Shortist has to be wise and patient to wait for a rebound to resistance level before initiating a short.