Daily Market Outlook for 19-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)              
              
STI ended its bullish streak yesterday with a strong gap down during the opening session. This was in reaction to previous day’s US market’s weakness. Within the trading day, HSI dropped deeply due to China’s weak economical results. Hence, STI weaken further causing 2740 support level to break. Seller starts to flood the market upon STI breaking the support level in anticipation of further retracement towards 2680 support level. However, last night, the US market rebounded 180pts with good earnings report by cooperates. Will STI continue to retrace or will it rebound today?                 
              
STI ended with a black candle yesterday. This black candle had confirmed the bearish white hanging man formation and hence, further downside can be anticipated. STI have yet again trade below 50ma line and the bullish movement on Monday might be considered as a whipsaw. Short term indicators have also turned bearish as MacD histogram and Stochastic triggered bearish signal. This will greatly encourage STI to retrace towards 2680 support. However, the selling strength might not be strong because of the weak volume that was seen yesterday. Furthermore, the US market staged a rebound yesterday and it might encourage STI not to drop further today. Hence, 2740 support turn resistance level might be tested today again. 50ma which is at 2750 level can also resist the price from going higher today.              
              
The banks experienced selling pressure yesterday as traders flock to take profit upon bearish indication. Uob suffered the heaviest selling within the sector as it broke its 20ma support level. DBS and Ocbc on the other hand did not suffer strong selling as they still managed to hold above 20ma support. 20ma might continue to give these 2 banks support today. The offshore retraced strongly after its strong surge the previous day. Gains on Monday were returned and they ended up close to last week’s closing price. Despite the selling pressure, they still managed to get support from the 50ma line and refuse to trade lower than that. 50ma will now be the key level to determine whether they will slide further today.              
              
The properties also experienced selling pressure yesterday but their selling actions were not strong one. This is because their immediate support levels are close to their immediate resistance level and this caused them to be trading in a narrow range. If the properties were unable to hold at their support levels today, they will experience a deeper retracement. If not, they should still be trading in a tight range today. The commodities also started their retracement yesterday after they have hit their respective resistance levels. Despite their retracement, they were still able to hold above 20ma and some of them were showing that the 20ma support level is holding well. Sakari experienced a sharp drop yesterday after it had rallied strongly last week. However, its retracement had hit a horizontal support level and bounce off slightly before it ended its day. Its support might be holding and Sakari might bounce off slightly today.               
              
In conclusion, STI’s drop yesterday might trigger further retracement towards 2680 level. However, numerous sectors’ retracement had caused them to reach their respective support levels quickly. Their support levels might be holding well and can trigger some rebound today. Unless the market decides to strike off the bullish movement by the US market last night, one should expect some rebound for STI today. However, the rebound could be capped by 2740 – 2750 resistance level. Henceforth, despite bearish indication from the indicators, the bearish sentiment might not be realised today as numerous support levels are holding well. STI might consolidate today and test its resistance before more selling sentiment can set in.              
              
Long traders can start to look for opportunities on the long side today as support levels are holding well. However, it will be better to take a little long position as the risk for deeper retracement is still on hand. Cut loss point should be set at a lower level to avoid unnecessary whipsaw. Good risk reward must also be taken note off before a long entry is placed. Shortist on the other hand must be aware that support levels are reached and therefore, they must be prudent to take profits off the market. At least partial profits are to be taken today. Entry for new short position is not encouraged despite bearish indication.