Daily Market Outlook for 22-Nov-2011

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STI continues it fall as the key support level of 2740 fails to hold last week. The start of the week started with a gap down and there is some recovery in price during the early trading session. However, after lunchtime, sellers start to enter the market in anticipation of weak Europe market opening. Hence, STI went lower before closing and it ended at 2697 level yesterday. US market’s DJI continue to trade 248pts lower last night as the US congress failed to reach an agreement on the methods of debt reduction. This might spark further concerns on top of the Europe debt issues. Will STI be able to hold above 2680 support level as it is approaching that level soon? Will there be a possible rebound soon?

STI broke a gap support level between 2719 – 2745 yesterday. This should that the downtrend is in play because in a downtrend, support should break easily. Hence, the next concern would be the 2680 level where a possible rebound is identified to happen. The short term indicators are still showing bearish momentum and are likely to continue. However, Stochastic has just entered the oversold region which might indicate a possibility of a rebound. But, there is no formation of bullish crossover yet. Hence, there could still be some room for the prices to retrace. Henceforth, 2680 support level might still have a good chance to hold well.

The banks continued to trade lower yesterday as Europe debt woes spark concerns for the performance of the banks. UOB fell the deepest yesterday as it broke another support level. It next support level is still quite a distance away from the current price and therefore, it can fall further. Ocbc failed to hold its recent low and broke down yesterday. It should be heading lower to its next support level to form a lower low. The offshores were performing strongly yesterday as they managed to hold their support levels strongly. Attempts of rebound were seen during the day but it was suppressed by the sellers. Their 50ma support is the key level to watch out currently because if this MA line is broken, the offshores will be trading downtrend instead of sideways.

The properties took a deep tumble yesterday as sellers were more willing to sell off the properties yesterday. Capitaland which has a possibility of continuing its uptrend failed to hold above its recent low yesterday. It is breaking for lower low and its downtrend could have been confirmed. Citydev have broken its 50ma line and is now trading below all the MA lines. Hence, it might continue to show further downside. The commodities suffered selling pressure yesterday as traders lost confidence of the commodities after Noble Grp reported its first losses. Noble grp continue to trade lower and is still seeking for a good support level to rebound. It is now testing its support level at 1.07 and there are no clear signs on whether it will be rebounding.

In conclusion, STI might still continue to see some selling pressure to happen today. 2680 support level could be tested and might be holding. Numerous sectors were now trading close to their respective support levels which might give strength for STI’s support level. Oversold reading in the short term indicator might also encourage this 2680 support level to hold. Therefore, it is important to identify bullish signs at 2680 level before one can conclude whether a possible rebound could happen. For today, it is quite unlikely to see any strong signs that the support is holding but it is certain that 2680 will be tested today.

Long traders might want to prepare for countertrend trades but they must wait patiently for bullish reversal candles to form at support levels before entering a long trade. Good risk and reward ratio must be identified before entering a countertrend long trade. Shortist who had make use of the breakout strategy to enter short position must be aware of their shorting position’s target. Take partial profits once the support levels have been reached.