Daily Market Outlook for 1/7/2011

*Disclaimer: This material is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to purchase or sell the product mentioned. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks. If there is any questions, please contact me (Jay)

STI had successfully trade above 3080 resistance level yesterday as it closes at 3120 level. This strong performance was caused by the announcement of the approval of plan to deal with the Greek’s debt. The market was buoyant and buyers flocked into the market as uncertainty was cleared. This caused a spike in the traded volume which the market had not experience for the past 1 month. Many were asking if it is time to buy as the gloomy situation starts to clear. Is it really the time for the bulls to be back?

STI formed a long white candle which penetrated 2 MA lines, namely 50ma and 100ma. This candle formation signifies a strong bullish reaction yesterday and could be sustainable. It had also confirmed the breakout of 3080 resistance level as the volume increased significantly. However, STI ended its day at the major resistance level of 3120. This strong resistance level could stop STI from going further. Based on the indicators, the indicators remain bullish and yet to show sign of overbought. Therefore, bullish momentum could continue and there could be a possibility that 3120 resistance level could be broken. The downtrend could have been disrupted by yesterday’s strong movement. Hence, STI could have a chance to head towards 3180 resistance level.

The banks had very strong performance yesterday as they start to trade strongly towards their recent high again. It was boosted by the announcement of the plan to tackle Greek’s debt woes. Uob had benefitted the most from the bullish strength yesterday as it is now trading at this year’s high. DBS and Ocbc had also threatened to break their bearish downrend yesterday. The offshore also managed to go against its possibility of downside risk yesterday. It was lead by Kepcorp whom had announced a contract deal which boosted the price higher. Kepcorp is now trading at a key resistance level of 11.06 which could be a turning point to break the downtrend momentum.

Despite strong market performance yesterday, the properties were struggling to make gains during their trading session. The only counter within the sector that managed to have a strong gain is F&N. It managed to break 20ma resistance and even broke the recent lower high formation with high volume. F&N’s trend is now no longer downtrend after yesterday’s price action. The commodities ended up fairly mixed yesterday as they struggled to trade higher. Indoagri which as indicated as a possible setup for continuation of downtrend, did not manage to break the 20ma resistance level yesterday and even end the day with a bearish signal. Any further selling pressure today would indicate that it will continue its downtrend.

In conclusion, as STI manages to break 3080 resistance level, the tides for the market could have turned. Downtrend formation might have been compromised and the trend could now be changed to sideways or even uptrend. If STI is to trade above 3120 today and manage to stay above it for the next week, STI would likely be forming sideways or even uptrend. If 3120 major resistance level fails to break. There is still a slight chance for the downtrend to continue. To achieve bullish trend for the coming weeks, the banks and offshore must continue to hold their gains. Properties and commodities which have been struggling to be bullish must also turn bullish for the next few weeks. Therefore, despite the bullishness, it might not be wise to chase the current price action. Long traders should wait for a good retracement to a support level to start picking up long positions. Shortist, however, must be vigilant to cut their losses if it is being hit and avoid adding new short positions. If the market starts to form a higher low formation, Shortist must quickly close their short positions.