Daily Market Outlook for 6-Jul-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 did not manage to continue its bullish streak yesterday as traders rushed to take profits off the market. Although STI managed to open slightly higher yesterday, the bearish sentiment was quick to kick in after the opening session. Selling pressure was seen throughout the day as traders avoided going on the long side. However, the trading volume was very weak despite the strong selling pressure being seen during the day. Many traders were concerned on how low the STI can retrace to and were also very eager not to miss the opportunity to go on the long side. What level should we watch out for today in order to prepare for a long position?

“STI closed with a bearish engulfing formation yesterday. This could indicate that more selling pressure could be seen for this few days. Another observation is that STI closed lower than 200ma yesterday and therefore, Monday’s price action could be a whipsaw. Based on the indicators, the indicators triggered a sell signal yesterday. This further concludes that STI might have further selling pressure for this few days. However, any downside action for now could be limited as 50 & 100ma is close to current price. Therefore, there could be a possible support being formed at 3100 – 3120 levels. A higher low formation could be formed at these levels. ”

The banks were trying very hard to continue its bullishness yesterday but failed to maintain its winning streak. Both UOB and DBS were seen forming black hanging man formation while Ocbc bank formed a bearish engulfing formation. Hence, selling pressure for the banks could continue today. The offshore were unable to trade higher yesterday as traders targeted them to sell their positions. Both Kepcorp and Sembcorp could be forming their higher high formation and should be retracing for this few days to form a higher low formation. Selling pressure is to be expected to continue as their indicators turn bearish.

The properties were unable to avoid the selling sentiment yesterday also. Partial of the gains the previous day was quickly returned yesterday. Bearish reversal formation was seen for F&N, Kepland & Capitaland. Hence, further retracement is expected to happen for them. The commodities were also seen forming bearish reversal formation yesterday. Numerous counters like Olam and Noble grp triggered sell signal and therefore, selling pressure could be seen in these 2 counters. The rest of the counters in the sector could follow suit today.

In conclusion, it can be seen clearly that the selling sentiment is a broad base one based on the observations in the sector analysis. After a weeklong of bullish movement for STI, it is now ready for a proper retracement before its trend can be decided. 3100 – 3120 levels could be a possible support level for STI to form a higher low formation. If higher low is being formed at these levels, then STI would have a good chance to turn sideways or even uptrend. For today, we shall be patient to wait for STI to test 3100 – 3120 support levels and identify if there is any bullish reversal formation before we decide to take long positions. Long traders should get ready to execute long positions if the stock is trading at its support level. Shortist might want to take this retracement opportunity to clear their short position to avoid future upside risk.