Daily Market Outlook for 14/6/2011

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STI managed to test 3040 support yesterday and it managed to bounce off quickly when it tested the level. The intraday rebound was quick and managed to push STI into the positive region. However, sellers came into the market again and press the price downwards. It was a tussle between the bulls and the bears. With strong overnight closing from STI, will the bulls win the battle today or the bears will continue to take the lead? Let’s look at the indicators and the sectors.

A black spinning top formation was formed yesterday. This candle formation has a longer lower shadow which formed like a hammer formation. This formation also coincides with the 3040 support level. This could imply that 3040 support is holding well and the bears are getting weaker. A rebound is possible at this level as long as the market turns bullish today. The indicators are also showing signs that the bearishness is weakening. Stochastic had formed a bullish crossover that indicates the bull might have possibly taken over. A white candle confirmation today would confirm the rebound towards 3080 resistance level. Currently, 3080 level will still carry on capping any upside movement.

“The banks attempted to trade higher yesterday but was quick to be pressed down by the sellers. UOB and Ocbc did rebounded back to its support turn resistance level but it failed to close above it. The banks could carry on testing the support turn resistance level today again. The offshore were fairly mixed as they are still trying to have a proper rebound. Kepcorp is the only exception. As noted yesterday. Kepcorp is at its important support level. It did not manage to hold it support level yesterday and it attracted traders to cut their losses and even shortist came into the market. This price action had confirmed Kepcorp’s continuation of downtrend. ”

The properties were able to stop their losing streak yesterday as either maintained at their previous day’s support level or even rebound off with a white candle. Both Citydev and F&N showed bullish reversal candles and this could imply that their rebound might continue. However, their upside is getting limited as their resistance levels are close. The commodities were lack of trading actions yesterday as they continued to struggle to find their respective support levels. As noted yesterday, Straits Asia is trading at its strong support level and might have a possibility of continuation of uptrend. Its price action yesterday proves that it needs more time for the support to form.

In conclusion, as STI had tested 3040 support level, it is likely that STI’s chances of rebound are getting higher. It confirm its chances of rebound, it must trade and close higher than yesterday’s closing of around 3057 level with a white candle. Upside might still be capped at 3080 level which becomes very unattractive for a counter trend trade. Various sectors are showing its strength of their respective support levels, hence, 3040 support level should hold. Strength of the rebound might most probably come from the properties sector or the offshore sector. Banks and commodities might provide a drag. Therefore, I do not expect any strong upside movement today and it is most likely muted with pretty low volume. Long traders might be attracted to enter the market today for the rebound, but be warned that the upside is really limited and most likely it will not yield good risk reward. Shortist might take this opportunity to take partial profits from their previous short positions. Get ready to short again when STI test 3080 level.