Daily Market Outlook for 13-Oct-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)              
              
The STI performed a gravity defying surge again yesterday, ignoring the 20ma resistance level and the black candle formed on the previous day. STI opened at the lower gap support yesterday but was quick to bounce off it during the day. Bullish buying was seen throughout the day but the most significant buying period came after the Europe market opens. The Europe market opens slightly higher and it brought STI traders to scramble into buying spree. STI ended 44pts higher, at 2737 level. Last night, DJI closed 102pts higher, not showing strong signs of its weakness in its bullish move. Will such bullish be able to push STI to break for a higher high today?              
              
STI closed with a long white candle which indicates its strong bullish movement yesterday. This price action also confirms that the 2680 and 20ma resistance at 2690 is broken. However, this white candle did not come with a significant increase in volume which might mean that this breakout might not be a strong one. Resistance level now stands at 2740 level which is a strong horizontal resistance level. Breaking this level would mean that STI’s downtrend might have changed to uptrend. However, the short term indicators are starting to show weakness. Stochastic is now trading in the overbought region and a bearish crossover is intermittent. Anyway bearish movement currently will trigger a bearish crossover. Henceforth, STI might continue to be resisted by the 2740 resistance level and breaking it is quite unlikely today. There is still a higher chance that STI might form a high at this resistance level.              
              
The banks continued their bullish movement after they managed to cover the gap support during the day. UOB and Ocbc are heading towards 50ma resistance and are close to the 50ma resistance level. Their indicators are indicating overbought signal currently, hence, upside might be limited. The offshore exhibits strong bullish movement yesterday as they managed to break free from their immediate resistance level. Sembcorp continues the lead and became the first offshore to test the 50ma resistance level. However, its’ stochastic indicator is now overbought and could have triggered a bearish crossover. 50ma resistance is likely to hold today.              
              
The properties tried their best to perform as bullish as the rest of the sectors. However, their bullish catalyst is not as strong as the banks and offshore. Most of the properties counters were up marginally. They recovered most of the losses that was made on the previous day’s price action. Generally, they were still trading very close to the 20ma line. Citydev is the only one that is significantly above 20ma and even tested 50ma. Hence, its upside could be capped. Most of the commodities managed to rebound back to its previous day’s opening price yesterday. These price movements have negated their bearish candle formation that was formed on the previous day. However, they are still trading at 20ma resistance line and it is still quite uncertain whether they have broken the resistance. Furthermore, counters like Noble grp, Indoagri and Olam are trading very closely to the 50ma resistance level. Hence, their upside might be capped too.               
              
In conclusion, STI’s resistance level of 2740 is truly tested now and the market has threatened to break it yesterday. It is likely to be tested again today as the bullish momentum has not subsided. However, weakness in the bullishness is starting to show in the indicators and this might limit the strength to break this 2740 resistance. Therefore, we might be seeing STI to be hovering close to 2740 today but it will not be able to break it easily. Any black candle formation now might indicate that STI is forming a high formation. If that happens, STI is expected to retrace for tomorrow or probably next week.              
              
Long traders’ might get excited by the bullish movements that the market has shown. Some might be enticed to enter long positions. However, it might not be a good entry point as the market has yet to confirm its uptrend and is also trading at resistance level. Patience is need for the long trader to wait for a good retracement. Shortist must have felt frighten by such strong bullish movement yesterday. Odds on the downside are being reduced but there is still a chance of a retracement happening. Therefore, shorting at resistance level currently can still be a good option. However, profit targets must be set closely and discipline on the cut point must be adhered.