Daily Market Outlook for 7-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)

Profit taking sentiment continued to loom STI yesterday as traders were very eager to take the profits of the market after 1 week of strong surge. Prices continued to retrace yesterday as it heads towards 3100 – 3120 support levels as identified yesterday. Trading volume was slightly higher but not a very high one. Traders were still very cautious in entering the market as uncertainty is still in the air. Will STI continue to head lower today?

STI confirmed the bearish reversal signal yesterday with a black candle formation. However, this black candle formation is shorter than the previous day. This signifies that the bears are growing weaker as it approaches the support zone of 3100 – 3120 levels. This also caused STI to close exactly at the 50ma line which could provide possible support for STI. The indicators were also showing confirmation of the bearish signal yesterday. Bearish sentiment could continue today and 50ma might not hold. However, it is observed that Stochastic is now out of the overbought region and MacD line is now above 0. Hence, there could be some bullishness sentiment in the current situation which STI could hold its support between 3100 – 3120 levels.

The banks suffered the most selling pressure yesterday as they confirmed their bearish reversal formation. It is also interesting to note that they are now trading at their respective support levels. DBS and Ocbc are now trading close to their respective MA levels which could limit their downside. The offshore sector also ended lower but heavy selling was only seen in Kepcorp. Kepcorp had confirmed its resistance level at 50ma and is now trading below 50 and 100ma. 20ma which is hovering at 10.86 could provide support for it.

The properties which were the stronger performers yesterday tried to trade higher yesterday. But the market was quick to make use of the opportunity to take profit and hence, most of them did not manage to hold their gains during the day. Citydev gapped up and trade higher in the morning. But during the day, it suffered selling pressure before closing and ended its day as a gravestone doji formation. The commodities were not spared with selling pressure yesterday too. Selling strength was seen selectively in counters like Noble grp and Olam. The rest did not show any significant selling strength.

In conclusion, might continue to suffer selling pressure today as numerous sectors are still a distance from their respective support levels. The sectors that might have downside room are the offshore and property sector. However, the selling strength could be neutralised by the banks as they are trading at a support level where possible higher low formation could happen. Hence fore, downside could be limited today and should be trading within 3100 – 3120 support range. Long traders might now be attracted to take long position on counters that have retraced significantly for the past 2 days. Entering the market right now should be cautious as there is no bullish reversal formation yet. Shortists are advised to make use of the opportunity to close their long position to avoid any risk in sudden upside movement.