Daily Market Outlook for 18-Nov-2011

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STI failed to stay above 2800 level yesterday as Euro concerns weights the index down. It opened in red in reaction to the drop in the US market. STI attempted to rebound back above 2800 level during the day but it failed to maintain at that level. Europe’s opening pressed STI towards is weak opening again and STI ended 29pts for the day. Euro zone concerns are now taking its tolls as this is the 3rd straight negative day. STI is now running a risk of turning downtrend once it tests 2740 key support level. Last night, DJI went into the red territory again, down 134pts. Will STI be able to hold at 2740 support level for this week?

The gap support level failed to hold STI yesterday. A doji with long upper shadow was formed and this indicates that the market was indecisive when it dropped lower. The upper shadow shows that 2800 level might have turned into resistance level instead. STI is now trading below 20ma and chances of its possible uptrend have diminished and the threat of turning downtrend is increasing. Short term indicators continue to be bearish. Stochastic had triggered a bearish crossover while RSI is now trading below 50% line. The key support level of 2740 would be tested and this level will determine whether STI will be going for a downtrend. If it breaks, we will likely see STI to head towards the next support of 2680 level.

The banks ended up lower yesterday but their attempt of rebounding was seen. However, bearish crossovers were seen in their stochastic indicator which might trigger more selling pressure in the banks today. The offshores failed to gain strength yesterday as selling pressure continues. Kepcorp failed to stay above 20ma and downside chances is now greatly increased. Sembcorp which is sitting at 20ma right now might follow suit. Bearish crossover in the stochastic is also seen in the offshores today.

The properties continue their bearish streak and are now threatening to break their respective support levels. Currently, only F&N and Capitaland are holding above their 20ma level while Citydev and Kepland are now below it. If F&N and Capitaland fail to hold above their 20ma level, more selling is to be expected for them. The commodities were mostly flat yesterday with selective selling. Olam suffered selling pressure yesterday as it breaks is recent low. However, it tested another support level which is nearby and bounces off. The trend of Olam has now turned into downtrend. Hence, further selling can be expected for it.

In conclusion, STI’s failure of holding above 2800 level will now lead STI to test 2740 key support level. Bearish indications are seen in the indicators and hence, 2740 support level might be threatened to break. Various sectors are also in risk of turning downtrend as they are struggling to hold their support levels. If 2740 support level breaks, it could trigger off a broad-base selling as most of the sectors are trading similarly. The banks or the offshores might be lead for the selloff. Henceforth, one should be watching closely at 2740 level and decisions must be made when 2740 level fails to hold.

Long trader’s long positions might be at risk currently as the expectation of continuation of uptrend has now diminished. Stop loss levels might be adjusted tightly now to avoid any unexpected downside. Shortist can now look to adopt breakout strategy to initiate some short positions once 2740 level breaks as uptrend is no longer intact and downtrend might be forming. Good risk and reward must be identified before entering a short position.