Daily Market Outlook for 22/6/2011

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STI performed a strong bullish movement which further confirms the rebound that is expected. On top of that, STI manages to trade above 3040 level which was expected not to be broken yesterday. This indicates that the bull is really strong and positive sentiments are coming back into the market. Many traders in the market are starting to question whether the market had hit a bottom. Is it really a bottom? Or is it just a technical rebound for further downside to come?

A long white candle with significant upper shadow was formed yesterday. This candle formation had confirmed the bullish harami formation. Hence, upward movement should continue today. However, as there is significant upper shadow being formed, the bullish movement might not be very strong today as it might be getting close to its immediate resistance. As 3040 resistance level had been breached, STI would likely head towards the stronger resistance level of 3080. The short term indicators too had shown continuation of bullish strength. RSI which has been oversold is now trending up and trying to move out of the oversold region. Therefore, with these indications, STI would likely to continue towards 3080 resistance level.

The banks confirmed their bullish reversal signal yesterday as they continue to get stronger. However, their strong surge had now leaded them to be trading at their strong resistance level. Uob especially, is now trading at 20ma and 50ma resistance level which it might have trouble breaching it. The offshore continued its bullish strength to as its bullish reversal signals are being confirmed with exception of Sembmar. Sembmar is now suffering a tight sideway range which it can break either way. As it prior trend is downtrend, chances of breaking downwards is higher.

The properties also enjoyed the bullish reversal confirmation yesterday as they had formed their lower low formation. They could be heading towards their respective resistance level to test it. F&N in particular had a strong upward movement yesterday. However, its candle formation looks like a shooting star. Hence, it might be facing its immediate resistance level and might not be able to break it today. The commodities were very selective in its bullish strength. Only a handful managed to confirm its bullish reversal signal but they are now very close to their respective resistance levels. Hence, upside could be limited for them today.

In conclusion, STI might start a tough battle between the bulls and bears today. Although the bulls had an upper hand as it has been bullish for the past 2 days, the bears would likely to come into play today as STI is now trading close to the major resistance of 3080 level. 3080 level would likely be holding as many of the key sectors are now trading at their resistance levels. The current bullish sentiment might not have enough strength to break this major resistance level of 3080. Hence, heavier selling pressure might be seen today. These selling pressures would unlikely form a bearish reversal today as the market might not be ready to continue it downtrend for today. Confirmation of the bearish reversal would most likely be tomorrow once 3080 level is being tested. Therefore, Long traders whom have been enjoying the technical rebound for the past 2 days should seriously consider about reducing or even close all their long positions. Adding new long position is totally not a wise move right now as the market is starting to trade close to the resistance level. Shortist should start to warm up their engines and get ready to enter short positions. Short positions can be initialled once bearish reversal signs with good risk reward are formed.