Daily Market Outlook for 10-Nov-2011

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STI opened higher yesterday in reaction to US’s overnight strength but it failed to maintain the bullish opening and slide down during the day. Italy’s concern start to rise and numerous traders were unwilling to commit which causes the price to retrace yesterday. STI ended 7pts lower than the previous day. Last night, the DJI failed to continue its bullish streak and retraced strongly which ended 389 pts down. Its drop last night was due to its reaction towards the Europe market’s bearish movement. Will STI be able to maintain its strength despite the bearish closing by DJI? Where will the critical support level of STI be?              
              
STI closed with a black candle with a little lower shadow yesterday. This black candle can be seen as a dark cloud cover formation which is a bearish formation. This bearish formation indicates that there is a chance of retracement if it is being confirmed by lower prices the next day. This formation also formed near the 100ma resistance line and could probably confirm the resistance by 100ma. The short term indicators were still on the bullish side despite the drop yesterday, however, the histogram which failed to turn bullish is of concern. If the bearish momentum is to take over, it would face a gap support range of 2813 – 2840 level, which is close to the horizontal support of 2850. If these support levels fail to hold, the strong support level which STI managed to bounce of last week is 2790 level which currently confluence with 20ma. The worst case scenario will be testing 2740 support level again which might indicate that STI’s uptrend might not be sustainable anymore.              
              
The banks yet again were trading mixed sessions yesterday as they were not trading in tandem. UOB was the only one that shows weakness as it traded $0.12 lower. DBS continued its bullish streak but testing its previous high of 12.89. It ended $0.01 higher than the previous and makes one wonder whether a break of previous occurred or not. The trading volume does not give a satisfying reason for the breakout. The offshores continues to show weakness as they were unable to find strong reasons to trade higher. They are now currently bounded by 20ma, 50ma and 100ma range which prevented them from trading in either direction. Hence, they are likely to continue to be trading in this range.                 
              
The properties were on the bearish side yesterday as they were unable to maintain their bullish posture. Citydev and F&N ended with bearish reversal formation and it might indicate that they are ready to retrace. This bearish formation also failed the bullish signal in the Histogram. Hence, they might not be able to sustain at their current levels. The commodities were down slightly yesterday despite the expectation of continuation of its bullishness. Noble grp will likely be the highlight of today as it announced its 3Q earnings report. Its 3Q earnings went deep into losses during to the recent volatility on the Forex market. Its CEO decision to step down from the position also caused investor to be concern about Noble’s future. Price for Noble is likely to plunge due to such news.               
              
In conclusion, STI is now at risk of retracing without testing its resistance at 2900. Concerns from the Europe market are now taking its toll on STI which could prevent its bullish momentum from continuing. Technically, 100m resistance seems to be a tough resistance level to break and bearish reversal is formed. If STI is to trade lower today, the bearish reversal will be confirmed and STI will be heading towards various support levels without a higher high formation. With the bad 3Q earning for Noble grp which is part of the index components, Noble grp is likely to drag down the value of STI today. Hence, STI is very likely to see prices trading on the negative side today. There are various support levels for STI currently. STI’s recent gap support at 2813 -2840 might give STI some support but it can be a weak one. Stronger support remains at 2790 level where 20ma is now hovering. In the worst case scenario, STI’s last line of bullish defence is at 2740 which it must hold in order to maintain its uptrend.                   
              
Long traders might start to panic on their current long positions. Discipline must be adhered and therefore, stop loss levels must be identified. Close of the long position if the stop loss levels have been breached. Long traders without position might be enticed to enter at the bargain prices, but it might not be a wise move as the current uptrend might be compromised. Shortist might see that it can be a good opportunity to enter counter-trend trades. As here is no clear indication of bearishness or weakness in the uptrend, Shortist has to enter short position with caution. Only counters with bearish indication and good risk reward ratio can be a good target for short. Otherwise, it will be safer to stay sidelines for now.