Daily Market Outlook for 6-Oct-2011

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STI attempted to rebound yesterday during its opening but failed to sustain during the day as fear of the Euro zone crisis is still looming the market. However, STI still managed to close above 2520 support level as it ended at 2528 level. There was no heavy selling during the day which might be signs of weakening of selling pressure. Last night, DJI rebounded 131 points which is the 2nd consecutive day of rebound. This can greatly encourage STI to stay above 2520 support level and even trigger a rebound for STI. Will STI rebound today? How far can STI rebound?                
              
STI ended its day as a short black candle which indicates that the bearish momentum is starting to weaken. No gap down was seen and nearly tested 2520 support level during the day. The short term indicators were still showing bearishness but RSI and Stochastic are now in the oversold zone. Oversold indicates that STI might have limited downside and 2520 support level should be holding well for today. If STI is to rebound at current support level, its upside could be capped at the immediate resistance level of 2580 or even the gap resistance between 2591 – 2604. There might even be a chance that STI heads towards the next resistance level at 2650 where there is a confluence of gap resistance between 2644 – 2659.              
              
The banks managed to rebound slightly yesterday which ended their selling streak. However, during their intraday movement, selling pressures were seen causing them to end up as a black candle with upper shadows. Its formation of upper shadow indicates that they were attempting to trade higher but failed to overcome the bearish sellers. If the banks manage to close higher today with a white candle today, their chances of rebound will be high. The offshore also managed to end their losing streak yesterday with an attempt similar to the banks. Sembcorp confirmed its bullish reversal pattern that was formed the previous day but was capped by its immediate resistance level of 3.40. However, given that it has trigger a bullish signal, it might even be able to break this immediate resistance level and head towards its next resistance level of 3.59.              
              
The properties were trading mixed yesterday as F&N and Citydev attempted to carry on their bearish movement while Kepland and Capitaland manage to rebound. F&N and Citydev have tested their immediate support level and based on its candle formation, it seems that they might have a chance of rebound today. If Kepland is able to trade higher than 2.40 today, its bullish reversal pattern will be confirmed and it might be rebounding towards 2.56 resistance level. The commodities also rebounded slightly yesterday with exception of Wilmar. Wilmar experienced one of the largest drops this year as it broke its important sideways support the previous day. However, it ended up at its support level of 4.40 and its downside could be limited for now.               
              
In conclusion, the bearishness that was seen in STI yesterday was not a very strong bearish movement. Majority of the sectors were now trading at their support levels and were showing signs of bullish reversal. If these sectors were able to hold at their support levels and confirm their bullish reversal patterns, STI will definitely rebound also. Thus, 2520 support level should be holding well today with a good chance of STI rebounding. STI’s upside is likely to be capped at its immediate resistance level of 2580 or the gap resistance of 2591 – 2604 levels. If it manages to reach this level quickly today, the odds of breaking this immediate resistance levels could be high as the indicators might have just started sign bullish indication. Therefore, one can also watch out for the next resistance level of 2650 level which confluence with another gap resistance between 2644 – 2659.              
              
Long traders might be rejoicing for the opportunity to do a counter trend trade today. Good risk and reward must be calculated before the counter trend trade can be fruitful. Taking profit at resistance level is a must as the underlying downtrend still prevails. Shortist might have taken the opportunity to take partial profit for the past few days and might have the bullets to fire another round of shorts. Patience is needed for the Shortist currently as the rebound is expected.