Daily Market Outlook for 26/5/2011

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STI attempted to trade higher again yesterday. However, it was yet again resisted by the 200ma level at around 3120 level. This is a tough resistance level to crack. The trading volume was lack of strength again yesterday as traders are not eager to enter the market in midst of such uncertain period. As today is Friday, traders might be more reluctant to hold their position over the weekend to avoid unnecessary risk. Will STI continue to struggle at this 200ma risk level or will it break this level today?

STI formed another small white candle yesterday. It is now squeezed between the 50ma and 200ma line. Short white candle signifies a weak bull was in play yesterday, which could also mean that there is still chance of bullish play today. The indicators also ended up bullish signals yesterday as STI started to trade higher. However, recent market actions had caused all the MA lines to start convergence to one another. If 200ma is to break today, STI might face another 2 MA resistance lines. Nearest resistance now is the 100ma level which is now trading at 3132 level. Next is 20ma which is now trading at 3142 level. These levels might cap the upside for today. I am expecting STI to test 100ma level at 3132 today.

The banks did fairly well yesterday as ended the day as they ended the day with white candle formation. UOB and DBS are now trading at the gap resistance level which might cap their upside for today. The offshore continued with their rebound today they had hit their respective resistance level. Sembmar tested the 100ma yesterday and attempted to test the gap resistance too. However, it ended the day as a black candle which failed to break both resistance levels. There is a good possibility that it might end its rebound here.

The properties managed to hold their support level well yesterday as there is lack of selling pressure yesterday. Kepland got the limelight as it rebounded strongly yesterday. Kepland is now trading close to the 20ma resistance and might not be able to break it. Kepland is showing signs of bullish divergence too. The commodities enjoyed bullish movement yesterday as it continued its rebound. Both Wilmar and Golden Agri confirmed their bullish reversal signal yesterday and might continue to go higher as they are forming an uptrend. Bullish strength for the commodities might continue today.

In conclusion, STI might still have the bullish strength to rebound today. Numerous sectors are still holding firmly and strong. Main contributor of the upside today could be from the banks, properties and commodities sectors. Offshore might be a drag for the index today. The upside today should be capped at 3132 or 3142 level where the 2 MA resistances are. Breaking of these resistance levels is quite unlikely today, given the fact that it is a Friday. Long traders can now only look for breakouts to trade with as most of the counters are now trading pretty close to their respective resistance levels. Shortist will start to get more opportunities to short; however, there aren’t much bearish signals yet. Patience is needed at this point in time