Daily Market Outlook for 8/6/2011

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STI indeed went lower yesterday but was quick to bounce off from its low of 3088 level after it tested the recent higher low level. As it is a sideways trend, bargain hunters made use of the opportunity to buy at the support in hoping that the sideways would continue. This resulted in the closing price being 2 points higher than the previous day. It was interesting to notice that the trading volume started to pick up yesterday although it is not a very strong surge. Could it mean that the support at 3080 level is holding strongly and STI is likely to rebound back to its sideways resistance of 3180 level again?

A white candle with lower shadow was formed yesterday which signifies that it had tested a support level and bounce off from it. However, with multiple MA lines above it, STI might struggle to break it today. The highly mentioned 3120 level is likely to cap the upside. Although many might argue that 3120 level might not be a strong level as it has been broken multiple times, it cannot be ignored as it could be where STI would form a lower high. If STI to break this 3120 level, then we can conclude that it will be heading towards 3180 level. The indicators continue to be more to the bearish side although the candles showed some bullishness. There are signs that the indicators are weakening. Stochastic is starting to narrow and if the price continues to rebound today, a bullish crossover might be triggered. I expect the price to carry on having some selling pressure and 3080 level remains the key support level.

The banks refused to trade lower yesterday although it had a weak opening. Its candle formation gave clues that they are holding well at their respective support level. Market might continue to test their support levels are their indicators are not showing signs of bullishness yet. The offshore also did not end up lower yesterday as they were firmly holding well at their respective support levels. Sembmar had formed a bullish engulfing formation but it ended exactly at the 100ma level. Chances of breaking it are minimal right now based on its indicators.

“The properties were more on the bearish side yesterday. Many attempted to close higher than its opening but failed to do so. Intraday direction was lack of bullishness and some ended up as a doji. Selling pressure for the properties might not have ended. The commodities were able to hold their losses well as they attempted to trade higher and some end closed higher than the previous day. This shows that they are still holding well at their respective support levels. Olam in particular suffered a strong gap down after their announcement of new debt facilities, increasing debts in such market environment does create long term holders to think twice. ”

In conclusion, the selling pressure that happened yesterday was a quick one. Support levels are being tested and this attracts lots of bargain hunters to jump onboard to buy up quick. However, as the STI is now trading close to 3120 level, these bargain hunters might make a quick trade and reduce their position due to uncertain trading environment. Selling pressure could be expected today. However, as 3080 support level is a strong level, any selling pressure would be capped. There is also chance of further upside for STI. As long as STI is able to trade above 3120 level, the bullishness should continue towards 3180. For now, based on the indicators, there is still a higher chance that 3080 would be tested again. It is best for both Long and Short traders to stay sidelines until the market break out of its sideways. Long traders whom are willing to take risk might nimble a little bit for the long side as long as the market is at its support level. Shortist is best to avoid the market as it is not trading at resistance level.