Daily Market Outlook for 3/6/2011

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Indeed, STI failed to break 3180 level yesterday and reacted strongly to DJI’s overnight closing. The selloff in the morning session reached as low as 3140 level. However, the market is quick to put off the selling strength by bargain hunters coming into the market to support the prices. This market action did not yield strong trading volume as the market is still uncertain of its direction. Would STI continue to retrace further start or bounce off to contest the major resistance level of 3180 again?

A white candle was formed for the day despite the heavy gap down when the market opens. This candle formation shows that the bulls are refusing to give up the gains and wanted to maintain its bullishness. With closer observations, STI opened at 20ma level and bounced off from 20ma. With the candle formation, this shows that the 20ma level is currently holding the support for STI. 3120 support level which was pointed out yesterday would continue to serve as a major support level. Looking at the indicators, bullish strength could still be maintained. However, Stochastic is starting to form bearish crossover. Therefore, STI is likely to test 20ma level again or even 3120 support level today.

The banks were weak during the opening session but they were quick to brush off the bearishness and ended the day higher than the opening. DBS was particularly strong as it even trade higher than the previous day closing. However, DBS still did not manage to break the resistance level of 14.96. The rest of the banks were still maintaining itself above the 20ma line. The offshore did not enjoy any strong rebound yesterday and remained weak for the whole day. However, the candles did not form solid black candles but small candles instead. This would mean that the selloff is not a strong one.

The properties did not manage to avoid being sold down yesterday but they managed to regain back some of their losses yesterday. Capitaland, however, did not enjoy the strength to rebound during the day. Bargain hunters failed to hold Capitaland’s support level of 3.08. Therefore, Capitaland might be heading towards its next support level going forward. The commodities held quite well too despite the strong gap down during opening. Indoagri in particular was the gem among the crowd as it refused to trade lower but instead closed higher than previous day. Its rebound might be going for a lower high formation but it has yet to be formed. Any bearish candle right now would indicate that the rebound would have ended.

In conclusion, the STI might continue to experience some selling pressure today. However, the selling pressure should be pretty weak as the 20ma support at around 3140 level could remain support. In the worst case scenario, it should hold at the major support level of 3120 level. I would not rule out also that STI would break 3180 today since it formed a strong white candle yesterday. However, I do not expect this to happen as many sectors are at resistance level with some forming bearish signal for the short term. On top of it, today is Friday and weekend is near, traders might not want to take over the weekend risk. Therefore, trading should be lack of activities today as the direction is very mixed for today. Long and short traders should stay sidelines today. Shortists whom have short positions should start to look forward to close their short positions as the underlying strength for the market is still bullish.