Daily Market Outlook for 23-Nov-2011

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STI ended its losing streak yesterday as it managed to rebound despite all the uncertainties looming around. It opened with a slight gap down and tested 2790 level before it attempted to rebound. STI swing from positive to negative throughout the day as traders were undecided on whether to sell or to buy. There was a good amount of trading amount the traders and this caused STI to be trading close to the average trading volume for the past 2 months. STI managed to close 19pts higher yesterday as traders were buoyant by the positive opening of the Europe market. However, the Europe market closed in red and DJI closed 53pts down last night. The change in the expectation direction might cause traders to swing back to the selling sentiment again. Will STI be going against the tide today or will STI attempt to test and break 2680 support level today?

STI ended with a bullish piercing formation yesterday. This formation indicates that it could be a possible reversal point as long as price continues to trade higher today. The short term indicators continue to show bearish readings despite that the candles are showing possible reversal point. Stochastic continues to be in oversold but the bearish momentum is starting to lose steam and there might be a possible bullish crossover forming. 2680 support level was not tested yesterday as STI hit a low of 2790 level only. Hence, with the short term bearish momentum still in play, STI might still continue to test 2680 support level. However, with bullish candle and oversold indication, there might a good chance of rebound. Rebound will happen as long as STI manage to close higher today.

The banks were trying their best to rebound of their respective support levels yesterday. Uob and Ocbc formed doji formation and this indicates the indecisive situation that they are in. DBS on the other hand, formed a bullish piercing formation at the 50ma line. 50ma might provide DBS a good support for a rebound. The offshores were the leading sector yesterday as they exhibit bullishness in their price. Sembcorp and Sembmar were showing bullish strength and they formed bullish reversal formation. However, Sembcorp is now facing resistance from both 20ma and 100ma. Hence, its upside might be capped.

The properties were the sector that dragged STI from rebounding stronger yesterday. Most of them ended up in red and some were still finding its support level. Capitaland and Citydev were still a distance away from their respective support level and hence, they suffered selling pressure yesterday. F&N and Kepland, on the other hand,             show signs that they have found their support and might be ready to rebound. The commodities were exhibiting strong rebound yesterday after their long losing streak. Golden agri lead the rebound early in the day and it closed at 200ma resistance level yesterday. Noble grp and Olam soon follow suit during the late afternoon trading session which caused STI to end up highest for the day. However, their rebound has caused them to be trading at resistance levels.

In conclusion, STI downside is starting to show signs that it is getting limited. There is a possibility of rebound currently after the bullish reversal formation was formed yesterday. But with the unexpected bearish closing by the Europe and US market, traders might start their selling sentiment again. Hence, STI can continue to test 2680 support instead of rebounding. With selling sentiment being weaken yesterday, 2680 have a good chance of holding well for today if it is being tested. A rebound can still be expected as long as 2680 support level holds. If STI fails to hold at 2680 level, more selling pressure should be expected and will be testing the next support level.

Long traders can enter a countertrend trade if there is a confirmation of the bullish reversal formation today. However, Long traders must make sure that the targeted counter must be testing support level and it formed a bullish reversal formation with good risk reward. Otherwise, it might not be worth taking the risk to enter a long position currently. Shortist should continue to watch out for their shorting targets to take partial profit if possible. Odds are still on the shorting side but it will be wise to wait for a proper rebound before entering short positions.