Daily Market Outlook for 15/6/2011

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Yesterday, STI tried to rebound and confirm the hammer like formation, but it failed to hold the gains and continued southwards before its closing. 3040 level continue to hold despite the selling strength yesterday. Market volume was average despite the active price movement within the day. The reason for the selling sentiment was due to weak price action by HSI and weak DJI futures. Last night, DJI plunges another 178 pts. This might create another round of selloff. Will STI hold 3040 level today?

A long black candle was formed yesterday which signifies that the bearish strength is back into play. STI had also tested the gap resistance (3056 – 3076) yesterday and failed to break it. This formation also failed the possible reversal formation. Therefore, 3040 level will continue to be the last line of defence for any further downward movement. The indicators continue to be bearish and could continue. The possible bullish crossover that was formed by Stochastic was not confirmed yesterday. Therefore, I will not be surprise that market might continue to be bearish. If 3040 failed to hold today, we shall be looking at a downside target of 2960 – 3000 level for possible support. With DJI’s plunge last night, chances of 3040 level to break is high.

The banks confirmed their respective resistance levels and were quick to continue their bearish momentum. DBS as noted yesterday had a fair bit of room to reach its resistance level; DBS gapped up in the morning and tested the resistance level straight away. However, it failed to stay or even break it and retraced strongly for the whole day. With such price actions from the banks, downside movement should be expected today. The offshore were mixed yesterday as some strengthen while some weaken. Kepcorp continued with its bearish movement after it had broken its important support level the previous day. Sembmar on the other hand had a surprisingly bullish strength and it surged towards 100ma. 100ma which is close to 20ma too might resist Sembmar’s advancement to a higher level.

The properties failed to confirm their bearish reversal formation that was formed the previous day. Kepland had a very bearish day yesterday as it closed with a long black candle. It could have brought the bearish sentiment to the rest of the property counters. Most of them are now back to their respective support levels and might threaten to break their support levels. Lastly, the commodities were lack of much price actions yesterday as they are still struggling to find their support levels. Wilmar had a surprising move yesterday as it surged strong to test its strong resistance level at 5.42 level.

In conclusion, as STI failed to confirm the reversal yesterday, traders might have lost confidence with the support level. Moreover, as the gap resistance was tested and possibly closed, the market might have decided that the rebound is enough and was quick to turn bear again. 3040 level could remain as a support level but with DJI’s overnight plunge, this level might not hold anymore. This bearish movement will be greatly encouraged if the various sectors which are trading at support levels failed to hold. The banks and the properties might be main contributor if their support breaks. If this happens today, we shall be looking at a downside target of 2960 – 3000 level as a support. Long traders whom might have tried for a counter trend trade yesterday have to be very prudent in cutting loss if the price hits the cut loss point. If 3040 breaks, going long will not be a good move because more traders would shift to the sell side. Shortist would be very delighted to see their positions bearing fruits although positions had been reduced. Entering short positions on breaking of support can be a good move as long as it yields good risk reward.