Daily Market Outlook for 17-Nov-2011

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Concerns of the Euro zone debt issue continues to escalate yesterday as the real issues were yet to be resolved. STI continues its retracement to close the gap support level. During the opening session, STI managed to start the day positively but after HSI opens, selling pressure starts to enter the market causing STI to slide into red. The lower level of the gap support at 2800 level failed to hold STI during the mid of the day and hit a low of 2772 level. The flat opening of the Europe market helped to lift STI back above 2800 level and at the end of the trading session, STI closed at 2807 level. Last night, DJI failed to hold its grounds last night despite its attempt to rebound during its trading session. Selling off in the financial stocks was seen before the market closes. Hence, DJI ended 190pts down. Will the support level of 2800 for STI be able to hold today?

STI formed a long black candle with long lower shadow yesterday. The long candle body implies that STI was facing bearish momentum which forces it to close lower. The long lower shadow gave a positive light to STI as it a symbol to show that its support level is holding well. The lower level of the gap support and 20ma support confluence at 2800 level provides a strong support. However, the short term indicators were still showing bearishness and Stochastic did not get its bullish crossover confirmed. Hence, bearish momentum might still persist. 2800 support level will be threatened again today. If it fails to hold, the next support at 2740 will be the key support for STI as breaking it will confirm the trend to be downtrend.

The banks continued to retrace and retest their support levels. DBS closed its gap support with a long lower shadow and ends its day flat. Ocbc tested its 20 & 50ma and managed to rebound above it with a positive closing. They will likely to retrace again today after the financials in the US market retraced strongly yesterday. The offshores closed flat yesterday despite their attempts to trade lower yesterday. They managed to recover back to the opening price before the market closes. Kepcorp and Sembcorp continue to be struggling in the narrow range of 20ma & 100ma. Breaking of either side will give a clearer indication of which direction they will be trading.

The properties continue to retrace slightly and most of them also formed long lower shadow. Citydev and F&N tested their 20ma support and managed to bounce off the support. Their uptrend might be intact after yesterday’s retracement but it is clearly showing that their uptrend is weak right now. The commodities were generally flat yesterday as they were still consolidating for a direction. Olam was hit by selling pressure which caused it to close 5cts down. This selling pressure comes after its attempt to break the 20ma and 100ma resistance levels. Hence, it might be starting to form downtrend.

In conclusion, STI might be in danger to hold above its support level of 2800 today. Given that the US market had a weak closing and the short term indicators of STI were not showing good indications, STI might have a chance to drop deeper. Key support level for STI currently is at 2740 level. Breaking of this key support will indicate that STI’s trend would have turned into downtrend. Various sectors were also trading at their respective support levels. Yesterday’s price action has proven that they are holding strongly at their support levels. But if they fail to hold above these support levels today, they will be going for further downside. Henceforth, STI is now trading a critical zone with 2740 as the last line of defence.

Long and Short traders should continue to stay sidelines until the market decides to choose which side to trend towards. Therefore, breakout strategies is the only way to find trading opportunities for today. There might be a chance that support levels might break; hence, Shortist might be able to find some counters to short on breakout. However, good risk and reward must be considered carefully.