Daily Market Outlook for 1-Nov-2011

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STI started the week bearishly as traders scrambled to take profits off the tables after the strong surge last week. Traders took lead from the weak US market closing last Friday to decide the profit taking move. STI ended nearly 50pts down to mark the possible start of the expected retracement. Trading volume was not as heavy as the last trading session. Last night, the DJI ended 276pts lower as the Europe market also plunged for profit taking. Will STI continue to retrace today? How low can STI retrace to?                
              
The STI ended with a long black candle yesterday. This candle formation can be seen as a bearish reversal formation called one black crow formation. This implies that there could be further selling pressure for STI in the upcoming days. The short-term indicators triggered bearish signals which strengthen the bearish readings. Therefore, it is no doubt that STI will continue its retracement for the next few days. STI’s immediate support level stands at 2850 level which is likely to break as it is not a strong support level. Henceforth, STI is more likely to find support at the next support level at 2790 where there is a confluence of the 50ma support line.               
              
The banks suffered strong selling pressure yesterday as traders exited the banks for profit taking. Bearish signals are being triggered and they will likely to continue their retracement towards their respective support levels. UOB in particular still struggled to break for a higher high as it failed to break its recent high. It is now retracing towards its 20ma support level. The offshore were not spared from the profit taking sentiment as traders were eager to exit the offshore. Sembcorp took the greatest hit as it ended 6.7% down; One of the biggest drops within a day. Sembcorp  is likely to continue its bearish movement towards its 20 and 50ma support lines.             
              
The properties also encountered some selling pressure during the day with exception of Citydev. Citydev which managed to break 200ma resistance last Friday continues its bullish streak yesterday. However, it encounters its major resistance at 10.90 level and struggled to break above it yesterday. Its shorter white candle formation might signal weakness in the upside and any selling pressure will triggered a bearish reversal point. The commodities suffered strong selling pressure yesterday as they failed to break their resistance levels. Indoagri, Noble grp and Olam suffered heavy selling after their strong surge last week. They are poised to retrace towards 50ma to find their support.              
              
In conclusion, STI sharp movement last week was indeed a quick one and sharp selloff was also seen yesterday. STI’s resistance at 2900 level held well and STI is ready to form a higher high formation. Bearish signals were triggered yesterday and STI is very likely to continue its retracement for the next few days. The target for STI’s retracement is likely to be towards 2790 support level as 2790 support level has confluence with 50ma support line. Henceforth, selling pressure is expected to continue today until the support level is reached.                   
              
Long traders must be glad to take partial profit off the market last week as the prices retraced strongly yesterday. Prices started to get attractive again to buy back the previous positions that are being sold. Long traders should exercise some patience to wait for the market to reach its support level and confirm that the support is holding. Existing position should rely on its trailing stop to protect its profit to avoid a sudden change in trend. Shortist must be glad that the market was triggered bearish signal and will be eager to go on short positions. However, Shortist must be aware that the market is now in an uptrend momentum; therefore, any downside should be limited. Hence, short position can only be established is it still yielding good risk and reward. If not, Shortist should avoid shorting.