Daily Market Outlook for 20-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 opened slightly higher yesterday but selling pressure was seen in the morning due to reactions of weak closing of DJI the previous day. However, buying sentiment starts to creep in during the mid of the day. As the Europe market opened positive, further buying sentiment occurred and pushes STI to end the day with 17 pts up. Over the night, DJI closed 202 points up which could likely set a more bullish tone for STI to open higher today. Will STI break the strong 3100 resistance level today? How far will STI rebound to? ”

STI formed a white candle with long lower shadow yesterday. This candle pattern signifies that the bullish momentum had set in and could be a possible reversal formation. Its lower shadow also signifies its reluctance to break the support level that it had formed last week. Further rebound can be expected as long as STI manages to break the 3 MA resistances that confluence at 3100 level. The indicators are showing bullish indication as the Histogram has started to trigger bullish signal. This will greatly increase the chance of bullishness to continue. However, as the gap resistance is yet to close, the upper resistance of the gap, which is at 3116 level, might restrict the upside movement for STI. If that level is breached today, we should be able to see STI to head towards the recent high or 200ma which is around 3150 level.

The banks inched higher yesterday despite the selling pressure it had experienced during the day. Significant lower shadow is seen testing their respective 20ma but failed to break it. This price action signifies that 20ma support is still strong and can continue to hold the banks. Higher low formation is getting much more obvious, hence, their prices is likely to continue to head towards their previous high. The offshore ended slightly higher than their previous day but their bullish attempts were not strong. Kepcorp which had been struggling to hold its support level ended the day with a bullish counterattack pattern. Kepcorp might have a good chance to rebound towards its 20ma line.

Despite bullish movement in the market yesterday, the properties struggled to stay firm as they closed slightly higher with exception of Citydev. Citydev ended lower as its selling sentiment continues. However, it is now currently trading close to its support level and the support level might have a chance to hold. The commodities managed to reversal their bearish movement and might be heading for a technical rebound. Noble grp and Olam which has been experiencing heavy selling started to stop their bearish advancement yesterday. Bullish reversal was formed for these 2 counters. Rebound towards their support turn resistance level could be expected for this few days.

In conclusion, as STI managed to end the day with a bullish candle and close near the 3 MA resistance lines, there is a chance that STI might be able to break these lines. Given that the indicators are all turning bullish, chances of breaking the MA lines are much higher now. However, another concern is the gap resistance between 3103 – 3116 levels. The upper level of the gap resistance might limit STI’s upside for today. If STI is able to break this gap resistance, we will be expecting STI to head towards the previous high of around 3150 level. Given the fact that the banks are bullish, they will likely continue to lead the index towards the resistance level. However, to truly break 3116 gap resistance, the rest of the sectors must either reverse their bearish sentiment or continue their bullish sentiment. Properties and commodities are the likely sector to contribute to STI’s upside for today. The offshore might face some resistance as they are trading close to their resistance levels. Long traders might want to focus on trading long on the properties as long as there is confirmation of the reversal. Commodities can also be a good choice as long as there is confirmation of their bullish reversal signal, but one must take note that trading commodities will be a counter trend trade. Shortist might want to continue to be patient and wait to see how the prices react at the gap resistance level of 3116 before deciding whether to go short.