Daily Market Outlook for 26/5/2011

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The STI staged a strong comeback yesterday. It opened lower with selling pressure seen during the day as DJI had a weak closing the previous night. However, before the market closes, STI managed to reverse the selling pressure to bullish strength and ended 5 pts higher. STI also ended very close to the immediate resistance level of 3120 level which was pointed out yesterday. Will STI be able to break 3120 level today?

STI formed a small white candle with long lower shadow. This formation looks like a white hammer but the lower shadow is not long enough to qualify as one. It is now clear that it is now trading above the 50ma but is still yesterday to trade above 200ma which is at 3120 level. 3120 level could still act as a possible resistance level for STI. The indicators are still showing bearishness and yet to form any signs for bullishness. It is good to note that the MacD line had cross slightly below the 0 line. This indicates the mid-term bearishness of STI. Therefore, 3120 resistance level would likely to hold for today although bullishness is expected based on the candlestick.

The banks had a mixed day yesterday with some strengthen while some weaken. DBS was the strongest among all but it is now facing the gap resistance. Bearishness might set in today. Ocbc on the other hand suffered selling and it ended up closing at 200ma. Its lower shadow forming might give a clue that its support level might be holding and rebound might be seen for it. The offshore were skewed to the positive side yesterday as oil prices starts to rebound. Upside is likely to carry on today but should be capped by their respective resistance levels. Kepcorp and Sembcorp will be expected to test their H&S neckline resistance level.

The properties attempted to rebound yesterday as they refused to close lower. Bullish strength could be expected in them but should be a weak one as their resistance level is close. The main contributor to STI’s rebound yesterday was the commodities sector. They suffered a strong selling off in the day but were countered with strong buying before the market closes. Majority of them formed long lower shadows which indicate their refusal of breaking their respective support levels. Wilmar and Golden Agri have higher chance of rebound today as they formed white hammer at 20ma as support. Furthermore, they might be forming a higher low today.

In conclusion, STI buoyant rebound yesterday was mainly contributed by the commodities and offshore sector. Despite the bearish readings in STI, they might be a chance of rebound today as long as the commodities and offshore sectors continue to show strength. The drag for STI could come from the banking and the properties for today. Upside for STI would still be capped at 3120 as the commodities and offshore are trading close to their resistance level too. Therefore, STI is expected to be trading flat today. Long traders might be very selective in choose which counters to long for counter trend. Wilmar and Goldenagri show possible setup for uptrend movement as long as they show confirmation. For Shortist, however, they would have more choices to go on the short side. Because there is lots of counters that are trading downtrend and are trading at or close to their resistance levels already. As long as the risk and reward is good, short positions can be initiated once there is confirmation.