Daily Market Outlook for 15-Nov-2011

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STI started the week with a strong gap up and ended 39pts higher. This bullish strength was mainly due to the strong closing by DJI last Friday night and easing of Europe situation over the weekend. However, trading activities were lacking as traders were unsure of whether this bullish strength will be sustainable; thus, trading volume was not very high. Yesterday, the Europe market ended weakly as Italy debt concerns starts to escalate again. This caused the DJI to return part of its Friday’s gains and it ended 74pts down. Will STI be able to continue its rebound today despite the weak DJI’s closing? Or will STI retrace today?

STI opened with a gap up and closed with a gap support formation. The gap support range is between 2799 – 2827 levels. A short black candle was formed yesterday and this indicates that there is lack of trading actions during the day but its black candle shows some bearishness during the day.  The price actions yesterday also have not filled the gap resistance between 2790 – 2853. The short term indicators continue to show bearishness despite the rebound yesterday. Therefore , STI might still encounter selling pressure today. If the rebound is to continue, the upper level of the gap resistance at 2853 will prove resistance to the upside. On the other hand, the downside will also be cushioned by the gap support between 2799 – 2827 levels. Henceforth, STI is likely to trade between this range of support and resistance between 2799 – 2853 levels for today.

The banks gapped up strongly yesterday as the Europe situation eased over the weekend. DBS which have remained bullish continued to trade higher yesterday. It attempted to break its previous high and managed to break it marginally. However, its trading volume remains low despite the breakout. UOB, which have been suffering selling pressure after its earnings report, managed to rebound strongly yesterday. However, sellers were still in play causing it to end its day with a black candle. The offshores attempted to trade higher yesterday but they encounters selling pressure before the market closes. Kepcorp and Sembcorp were attempting to break the 100ma resistance line yesterday; which they failed to break it. If they managed to break this resistance level, they will have a good chance to continue their uptrend.

The properties rebounded strongly yesterday after they had experience one of the strongest selling last week. Citydev was the top performer yesterday as it had rebounded 44cts higher yesterday.   It is now back above 200ma and might attempt to test its previous high again. If it manages to break its previous high of 10.82, it might have a good chance of continuing its uptrend. The commodities were trading mixed yesterday as they have lack of catalyst to push their prices higher. Golden Agri was the top performer in this sector as it manages to trade higher than its recent high. Its price action also managed to break the 200ma resistance line with high volume. This could be a valid breakout. However, it is now facing a strong resistance level of 0.68 and it did not managed to break it yesterday.

In conclusion, STI might still be trying to close the gap resistance between 2790 – 2853 levels as the gap is not fully closed. A gap support was also created yesterday and this might encourage STI to retrace towards this gap range of 2799 – 2827 levels. Given that the indicators were still giving bearish indications and in conjunction with bearish closing of DJI, there is a good chance of STI to retrace today. Henceforth, with possibilities of either up or down direction today, one can be certain that STI is likely to trade between the ranges of 2799 – 2853 today. So, STI is expected to be lacking of trading activities today.

As STI is expected to be trading in a narrow trading range, both Long traders and Shortist will find it hard to initiate positions with good risk and reward ratios. Both types of traders should be wise to stay sideline currently and wait for clear direction before entering any position. If there is any position currently, strict stop loss level should be set to prepare for unexpected situations.