Daily Market Outlook for 14-Oct-2011

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The STI attempted to test 2740 resistance again yesterday but failed to break it. STI was lack of trading activity yesterday as traders seek for more catalyst to push the price higher. STI reached as high as 2758 during the day but selling soon sets in as the resistance at 2740 remain strong where sellers were seen during the day. Trading volume was seen to be a bit higher than the previous day but it was not a heavy one. Weak Europe opening had also caused STI to retrace further before closing and thus, STI closed at 2733 level. Last night DJI attempted to retrace and ended up 40 pts down, breaking the bullish streak for the past few days. Will STI also starts to retrace today and close lower?              
              
STI ended with a small black candle with upper shadow. It can also be seen as a black shooting star formation which indicates that the resistance level is holding well and retracement is more likely now. 20ma line has started to flatten and it indicates that the downtrend momentum might have changed. 50ma is now creeping lower and it will strengthen the resistance level of 2740. Stochastic has now triggered a bearish crossover and this indicates that the possibility of retracement is going to be high. Henceforth, STI is now unlikely to break 2740 resistance level and is more likely to retrace. However, the downside can also be limited by the 20ma line below which is now at 2680 level where there is a horizontal resistance turn support level. STI might be seen trading within the range of 2680 – 2740 levels today.              
              
The banks ended their bullish streak yesterday as they closed lower yesterday. They formed black candle pattern which ended up as a bearish reversal formation. Their stochastic indicator also triggered a bearish crossover, hence, the banks are likely to retrace. However, their 20ma line might provide support for any downside. Most of the offshore managed to continue their bullish strength yesterday and tested 50ma resistance line. Kepcorp and Sembmar managed to catch up with Sembcorp and test their respective 50ma line. Sembcorp, which is leading the sector, did not manage to break the 50ma resistance and ended up with a bearish reversal candle. Hence, its upside is still capped by the 50ma and retracement is likely as the stochastic triggered a bearish crossover.              
              
The properties continued to attempt to break their respective resistance levels yesterday but were found to be lacking of buying strength. F&N is the only exception as it manages to break its multiple MA lines yesterday. It even broke its symmetrical triangle resistance line and thus failed the symmetrical triangle formation. Hence, F&N is back to sideways trend again. The commodities were trading mixed yesterday as only selective stock gained bullishness. Olam and Sakari managed to beat its 20ma resistance level and surged strongly above it. Both of them are likely to head towards their respective 50ma line as resistance. Indoagri and Noble grp which is slightly above their 50ma line is seen struggling to break the 50ma line. Bearish crossover in Stochastic is seen for these 2 counters.               
              
In conclusion, STI will continue to attempt to break its 2740 resistance level today. However, it will be tougher to break it as the 50ma is now closer to this resistance level. Bearish indication is starting to show in STI which will cap its likelihood of trading higher than 2740 resistance level. Hence, STI is more likely to retrace. Furthermore, it is also seen that most of the sectors are having trouble breaking their respective 50ma line and bearish indications are also indicated. Therefore, there is a higher chance of retracement for the next few days and STI should be trading between the range of 2680 – 2740 levels for today.              
              
Long traders’ have to continue to be aware of the resistance levels and take profit when bearish indications are confirmed. Adding new positions is not advisable right now. Waiting for a good retracement should be more fruitful than chasing the prices right now. Shortist might have a chance to enter short position but similar to yesterday, Shortist must be aware that the market’s trend is no longer downtrend. Hence, quick profit and tight stop loss points must be exercised for the shortist.