Daily Market Outlook for 23/6/2011

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STI opened higher as it attempts to continue its bullish momentum; however, the selling pressure came in quickly without give chance for the gains to stay. Selling pressure was seen across the board as traders make use of this rebound to clear their long positions. The bearish sentiment was caused by fear of worsening of the Greek debt which has been looming the market for the past few days. Will the bullish streak for the past 2 days end here? Is STI ready for another league of sell down?

STI formed a long black candle yesterday which is bearish dark cloud cover formation. This formation signifies that it could be a possible level to reverse for a lower high formation. However, as this formation requires confirmation, STI must trade lower than yesterday’s closing price in order to confirm its bearish movement. Although there is bearish indication from the candlestick, the indicators had yet to react bearishly. Therefore, there could still be some underlying bullishness unless today starts to trade lower. Stochastic has successfully exited the oversold range but RSI is still attempting to do so. Hence, we will likely to see that the bulls in the market would continue to struggle to fight the bears. A mixed day will be expected.

The banks generally tried to trade higher but ended its day as a black candle with exception from UOB. UOB was trading different as it ended its day with a white spinning top candle above the 20 and 50ma line. This indicates that the bulls are uncertain currently but may be finding its support at the 20 and 50ma line. The offshore also attempted to trade higher yesterday but failed to hold its gains. Sembcorp was the worst affected as it ended its day as a bearish engulfing formation. However, its downside might be limited by the 200ma line which it had successfully bounced off from.

The properties were hit by selling pressure yesterday. F&N was the worst hit as its bearish candle from the previous day was confirmed by a long black candle. It could be heading towards its previous low of 5.45 to find some support. Kepland which had sharp upward surge recently was not spared as it ended up with a clear dark cloud cover formation. The commodities were unable to make any significant gains yesterday as the selling pressure continues. Straits Asia which has been uptrend is now having a good chance of turning downtrend. Straits Asia formed a bearish reversal formation at its 20ma as resistance currently. If Straits Asia’s bearish reversal formation is being confirmed today, it would be forming a lower high which is an indication of downtrend is forming. Long trader would likely to flee its positions in it in order to protect further downside.

In conclusion, the bear seems to be back in STI already. With its formation of bearish candle yesterday and with multiple sectors also forming similar formations, selling pressure could be seen today. However, as the indicators have yet to trigger bearish signal, the selling pressure might be weak. If STI is to confirm the bearish candle today, a lower high formation would be formed. This would mean that downtrend is likely to continue. Currently, the immediate support level would be the psychological support of 3000 level. As it is a downtrend, it could even reach the next support of 2960 level. Long traders have been warned to flee the market yesterday. If one had missed the opportunity, today might be a good time to exit the market whenever there is a slight rebound in the intraday. Shortist can start to fire their shorting bullets onto targets with good risk reward for shorting. Shorting this time round should be less aggressive as the downside is getting narrower.