Daily Market Outlook for 1/6/2011

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At last, STI manages to break the 20ma yesterday and is now trading towards 3180 level. The market was reacting to the positive news of the economic data from Japan which lifted the bullish sentiment in the whole Asian market. The trading volume got better yesterday and was at the average amount for the 2 months period. Will STI continue to head towards 3180 level today?

A long white candle was formed by STI yesterday. This signifies that the bullish sentiment is in the market again despite the bearish formation that was formed on Monday. However, STI is yet to clear the gap resistance level of 3149 – 3160. There could be some selling pressure at this level. As STI is now trading above 20ma, any downside risk for now should be capped at 20ma or worst case scenario, 3120 level. The indicators are still bullish and could have strength to continue pushing the STI upwards. Hitting 3180 resistance level should not much of a problem for this few days.

The banks were the main sector that pushes the STI to a higher level yesterday. UOB which was stated yesterday did not manage to break the 20ma support and thus failed the bearish engulfing formation. DBS & Ocbc attempted to trade higher yesterday which indicates the possibility of more upside movement. The offshore sector managed to hold their gain well yesterday as it had failed its bearish reversal formation yesterday. Kepcorp which was highlighted yesterday did not confirm its bearish reversal formation but instead broke the 20ma as resistance. However, Sembcorp and Sembmar are still struggling to trade higher.

The properties managed to pull of some gains yesterday. Kepland failed it bearish engulfing pattern yesterday and broke 20ma too. Capitaland which has been lack of trading interest did not get any rebound from the overall bullish sentiment. Its key support at 3.08 is very crucial to hold in order for it to have a chance to reverse for the upside. The commodities were generally weak but for selected few, it enjoyed bullish strength. Straits Asia in particular broke out from its ascending triangle formation and is now heading towards its immediate resistance of 3.09. Noble grp also managed to gain strength and broke 20ma resistance.

In conclusion, STI could continue to trade higher today and 3180 resistance level could be tested. Bullish strength would continue as long as the banks and commodities maintain their strength. Offshore sector would still be a possible drag but signs of bearishness are starting to diminished. The properties sector might also provide some drag if their bullish strength is not sustainable today. Therefore, the strategy for today will remain the same as yesterday. Long traders should wait for a clear break out before entering the market. Counters that are forming uptrend and are at support level could be a good entry point for long. Shortist might be disappointed as there is no confirmation for the bearish side yesterday. Therefore, shortist should wait for another opportunity with good short setups.