Daily Market Outlook for 24-Nov-2011

*Disclaimer: This material is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to purchase or sell the product mentioned. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks. If there are any questions, please contact me (Jay)

STI failed to confirm the bullish reversal formation yesterday as concerns of the Euro crisis and the negative closing of DJI the night before caused traders to scramble to take their position off the market. 2680 support level was indeed tested yesterday and was broken during the day. STI even hit a low of 2666 level as it attempts to test the next support level of 2650 yesterday. However, before market closes yesterday, STI managed to rebound back to 2676 level and close at that level. Closing of 2676 is slightly below 2680 level and it draws concern of whether it is a whipsaw or has the support been truly broken. Last night, fresh economic concerns draw DJI lower by 236 points. Weak closing of DJI might create a weak opening in STI. Will STI go lower today to test 2650 support? Or is 2680 support level still holding assuming that yesterday’s closing is a whipsaw?

STI ended lower than the previous day low and formed a black candle with little lower shadow. This implies that the bullish piercing formation did not achieve confirmation and therefore, selling sentiment will persist. This candle also closes slightly below 2680 support level which this support should be considered broken. However, its lower shadow formation gives some hints that the market is attempting to hold this support. MacD line is now below 0 and this gave confirmation that STI is going in a downtrend for the mid-term. However, the short-term indicators are giving hints that the bearish momentum is weakening. Stochastic triggered a bullish crossover and at the same time it is trading at the oversold region. Hence, a rebound can be expected soon. Any upside now should be capped at 2740 level while downside should be capped 2650 level.

The banks failed to rebound yesterday and instead, it attempted to drop further yesterday. Heavy selling was seen in both Uob and Ocbc yesterday as traders were not confident of a rebound to happen for these 2 banks. However, from the charts, Uob and Ocbc have reached a support level and their formation of lower shadow shows that the support level might be holding well. The offshores failed to continue its rebound yesterday; instead, they retraced and gave up most of the gains that was incurred the previous day. Sembmar managed to bounce of the 50ma on the previous day but yesterday, it retraces back to close at 50ma again. However, its lower shadow formation is giving clues that the 50ma support level is holding.

The properties fell deeply yesterday with exception of F&N. Citydev fell the most yesterday because it had broke another support level. Currently, it might be heading towards 9.40 as the next support. Capitaland also fell lower but it ended with a black hammer at support level yesterday. Hence, there might be a chance that Capitaland would show a rebound today. The commodities did not manage to continue their rebound yesterday but instead, the bullish reversal formations failed. Sakari Res suffered the most as it continues to search for another level of support after it broke its immediate one yesterday. Sakari is now trading at its support level of 1.87, hence, it might find itself some support here.

In conclusion, STI might be ready for a rebound as the short-term indicators is starting to show bullish readings. Furthermore, most of the sectors are also showing their strength at support levels and therefore, chances of breaking their support levels are quite slim. The break of 2680 support level might a whipsaw as STI closed marginally below it. Given that DJI experience a weak closing last night, STI might also run a risk of not being above to rebound today and retrace towards 2650 level again. In order to identify whether a rebound will happen for the next few days, 2680 level will be the key. If STI manages to go against the odds and trade above 2680 level today, we should be able to experience rebound for the next few trading days.

Long traders can choose to enter long positions as long as the counter is trading at support level with bullish signals in their indicators. Entering long positions right now will still be considered as a countertrend trade and therefore, good risk and reward ratio must be achieved. Shortists whom have short positions would see their shorting targets being met. Therefore, Shortists should be encouraged to take at least partial profits and wait for another shorting opportunity when market is trading at resistance level.