Daily Market Outlook for 8-Jul-2011

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STI attempted to break the profit taking sentiment yesterday as it managed to close 11pts higher yesterday. Although it has a strong closing, some selling pressure was seen during the day as some trader attempted to push the prices lower. However, the market was still firm and held on well to its gain. Trading volume got a little bit higher than the previous day which could show that market interest could be increasing. As STI manages to bounce off 3100 – 3120 support levels, this could be a possible reversal point for a higher low formation. Will STI continue to go higher today despite the fact that today is Friday?

STI formed a small white candle yesterday which can be also deems as a bullish harami pattern. However, as the retracement days are only 2 days, this bullish harami pattern might not be valid. Upper shadow was also seen on the white candle which signifies market’s reluctance in moving higher. Hence, some selling pressure is still in play. This candle formation also implies that 50ma support level is holding well and could be a good reversal point. Looking at the indicators, the short term indicators are still having bearish readings and also yet to show signs of weakness. Meticulously, RSI managed to creep into the overbought zone. This could mean that the bullish underlying is still firm and strength could strengthen soon.

The banks were seen as the main contributor of the bullishness in STI. DBS was the strongest among the banks as it rebounds off strongly from the 50MA support and is trading close to its previous high. DBS’s volume got significantly higher yesterday. Ocbc, however, did not perform greatly yesterday as it is still struggling at the 200ma level. If the sentiment for this sector is still bullish today, we might be seeing market to rotate its strength to Ocbc today. The offshore sector’s movement were selective today as only Sembcorp manages to trade bullishly. Its strong bullish movement came before market closes which caused it to break 50ma resistance and even the previous high. Hence, it should be heading towards next resistance level of 5.35 level. Sembmar was surprising weak yesterday as it failed to hold its support at 5.34 level and it closed close to 20ma level. A reversal is important at this level as failure to do so will result in the trend to change back to sideways instead of uptrend.

The properties were another contributor of the bullishness for STI yesterday. Most of the properties ended up with a white candle formation and could imply more upside is to come. However, there have yet to break their recent high and might struggle to break it today. Citydev in particular is facing a strong resistance level at 10.92. Breaking it would imply that Citydev’s underlying bullishness is very strong. The commodities were generally weaker yesterday as some of them are still struggling to change their trend to sideways or uptrend. Olam, in particular, has retraced back to 20ma line and has shown an inverted black hammer. This could be a possible point for it to form a higher low formation to confirm its uptrend movement. However, strong resistance level at 2.79 might prevent it from going higher.

“In conclusion, selling pressure seems to have weakened yesterday and the bulls were gaining strength. STI could be preparing for its reversal and form a higher low formation at this support range of 3100 – 3120 levels. Various sectors were also showing signs of strengthening in the bulls. Banking and properties sector will continue to be the contributing sector to push STI to break for a higher high. Offshore would be the main catalyst to ignite further bullish movement. In order for the market to have a broad base bullish strength, the commodities must also hold its support level well before we can see a true bullish market. Opportunities for Long trader are here and watching out for strong support levels to long would be the key. Shortist should have already scrambled to close their short positions yesterday to avoid upside risk. ”