Daily Market Outlook for 25-Oct-2011

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Yet again, STI showed a spectacular bullish strength yesterday as it gapped up strongly in reaction to US’s strong performance last Friday. STI ended 48pts higher. The gap up had immediately broken the immediate resistance level of 2740 which confluence with the 50ma line. This breakout indicates that STI will be test 2790 resistance level and an uptrend could have been formed. However, despite the bullish movement that was seen yesterday, the trading volume was still seen to be low as many continues to stay sidelines for clearer direction. Will STI be able to sustain its gains today? Or will it break 2790 resistance level today?              
              
A bullish white candle was formed by STI yesterday and it had created a gap support. The gap support is now between 2719 – 2745 levels which can hold STI firmly is any retracement occurs. Yet again, STI is now trading above the 50ma line and this also signifies that STI have formed a higher low formation. What is currently lacking is a higher high formation to confirm STI’s uptrend. In order to confirm the uptrend, STI now has to break 2790 resistance level. The short term indicators triggered bullish signal and this implies that the retracement could have ended. More buying momentum might follow if STI managed to confirm these bulling signals today. With the support from the indicators, chances of STI breaking 2790 resistance level will be greatly increased in the upcoming days.              
              
The banks contributed strongly to STI gains yesterday as they rebounded strongly from their retracement that happened last week. Bullish signals were also seen clear for the banks and if they are confirmed, further upside should be seen for them. It is now clear that for DBS and Ocbc, their 20ma support level are holding well and higher low should be formed. The offshore started the trading session with a strong gap up and remain bullish throughout the day. Kepcorp was the strongest performer in the sector as it manages to break its previous high to confirm its uptrend movement. Kepcorp should be heading towards 100ma which is around 9.60 level.              
              
The properties also ended up higher yesterday but there isn’t much trading action within the day. Despite that, the properties triggered bullish signal and might be ready to show further upside. Citydev attempted to break for a higher high yesterday but it failed as the resistance is strongly confluence with 100ma. Its bullish signal in its indicators might help it to break its resistance level. The commodities also rebounded strongly yesterday which ended their selling streak last week. Noble grp, Olam and Golden Agri had confirmed their support at their respective 20ma; uptrend could have formed for them.                
              
In conclusion, STI’s rally yesterday is a broad-based one and the bullish signal should be sustainable despite weak trading volume yesterday. Most of the sectors were also triggering bullish signal but they will required confirmation by breaking their immediate resistances. Due to the weak trading volume, it is hard to expect STI to breakout its immediate resistance of 2790 immediately. Hence, STI might require some time to consolidate slightly before breaking this resistance level. The consolidation level should be towards the gap support that is had created yesterday; which is 2719 – 2745 levels. Henceforth, the odds for STI to turn uptrend are still high currently.                  
              
Long traders should have entered some long position yesterday when the bullish signals are triggered. Further long position can be initiated today as long as it still yields good risk reward ratio. Shortist might felt that the surge yesterday could be too sharp and prices should retrace. However, Shortist has to be reminded that the downside could be limited by the gap support that was formed yesterday. It will be wiser to stay sideline for the moment.