Daily Market Outlook for 18-Aug-2011

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STI ended up 4 pts lower yesterday as it had attempted to rebound from the drop in the early trading session. The stronger opening did not manage to convince the market to trade higher for the day as buyers were still cautious of entering the market. Selling pressure came into the market when Europe market had a weak opening. Trading volume was lacking which could probably tell that the market participants were trading cautiously. As the drop yesterday was not very convincing, many were wondering if STI can go lower. Do we need to expect STI’s rebound to continue or more selling pressure will be coming?

STI close with a small black candle yesterday. This candle can be considered as a black star which signifies indecisiveness in the bears. Hence, STI was not too sure of whether to trade lower yesterday as there is lacking of contributing factors. Based on the indicators, they are still in the bullish momentum. However, there are signs that Stochastic is starting to weaken as the lines are narrowing. Hence, it is likely that any rebound that maybe seen today should be suppressed. Resistance at 2890 level should remain preventing any further upside. As the bullish momentum is weakening, there is a good chance that STI might end up lower today. If that happens, STI is likely to trade towards 2800 support level to test it.

The banks were lacked of trading activities as they were struggling to find their direction for the day. Most of them end its day with either a doji formation or a star formation, which signifies indecisiveness. UOB, somehow, managed to trade above 200ma again but it did not manage to break its recent high. The offshore ended slightly higher or lower than their previous day’s closing yesterday. Its price action shows its reluctance to trade lower. Their black candle closing also tells that the selling pressure is still seen yesterday. Selling pressure is likely to continue for this sector today.

Some selling pressure was also seen for the properties sector yesterday. Most of them ended their day with a black candle formation. F&N was seen as the worst off as it experienced the most selling pressure yesterday and even ended the day confirming the bearish engulfing formation. Therefore, F&N might see further selling causing it to trade towards support at 5.40 level. The commodities were selectively stronger yesterday as this sector start to catch up with the rest of the sectors. Golden Agri ends its day with a significant white candle but was capped by its resistance level at 0.67 level. Straits Asia also attempted to trade higher yesterday but it failed to break 200ma resistance again. It ended its day as a black candle with upper shadow which can be viewed as a good shorting candidate.

In conclusion, STI can continue to struggle to find a clear direction today as the market lack of catalyst to trade higher or lower. The odds for trading lower are getting higher as the indicators are starting to show signs of weakening. STI’s resistance level at 2890 would continue to hold as there is lack of reasons for buyers to enter the market. Many sectors were also hovering at their previous day’s level but most of them ended up with a black candle. Hence, there is also a good chance that STI might start to trade lower today. If STI is to end lower today, STI should be heading towards 2800 level again for the next few days. Long traders should have already sold into strength to protect from downside risk. Staying sideline should be the best strategy for Long traders today. Shortist should start to get busy preparing and plan their short positions. Upon confirmation of the bearish signals, Shortist should be encouraged to enter short positions with good risk rewards.