Daily Market Outlook for 21-Dec-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 continues to trade lower yesterday as the concern of the Euro crisis still looms the market. HSI and Nikkei were able to trade on the positive territory yesterday but STI failed to maintain its positive standing despite a positive opening. Selling made use of the opportunity to sell into strength, fearing that the market can fall further. Hence, STI closed at 2614 level which is just merely 3pts down. Last night, the DJI exhibits a strong 337pts rebound, in reaction to the positive home data in Germany and successful Spanish short term debt auction that happen yesterday night. The fear of the escalation of Euro debt crisis eased as confidence of solving the crisis rose. Can STI enjoy similar rebound today? How far will the rebound be?

STI ended with a short black candle yesterday. This black candle shows the continuation of the bearish momentum but the bearish strength is getting weaker as the candle gets shorter. Sign of both upper and lower shadow shows the indecisiveness of the market. This indecisiveness could be due to testing the gap support between 2605 – 2620 levels. This gap support is still holding the market well. Looking at the short term indicators, the indicators were still showing bearish indications and hence, selling pressure can persist. Stochastic still remain in the oversold region which shows the possibility of downside limit. Therefore, 2605 – 2620 gap support might continue to hold as a support.

The banks continue to head lower as concerns of the Euro crisis continue to affect the banks. DBS continues to head lower as it is still seeking for its support level. Ocbc tested its recent low support level again but it failed to break it for a lower low. The offshores were showing strength yesterday as they refuse to trade lower yesterday. Kepcorp is now testing the cluster of MA resistance lines and were unable to break them yesterday. Sembcorp showed a bullish reversal formation which indicates that it is attempting to rebound to test its resistance level at 4.02 level. Sembmar is also attempting to rebound towards its 20ma line yesterday.

The properties were trading mixed again after it had struggled to maintain their respective support levels. Citydev continues to consolidate between 8.90 – 9.00 range. It is now in danger of forming a bear flag if it still fails to break higher than the consolidation range. If Citydev trades lower than 8.86 with high volume, it would confirm the bear flag and Citydev will head much lower. F&N did a strong rebound yesterday and it ended at 20ma resistance. Yesterday, most of the commodities were seen to end positively. Only Indoagri and Golden Agri failed to end higher. Indoagri failed to hold its sideways support and broke it. However, there are no signs of strong selling volume and it might be a possible whipsaw for Indoagri. If Indoagri is able to stay higher than 1.27 level today, yesterday’s movement would be consider as a whipsaw. Golden agri failed to stay above 20ma yesterday as it prefers to test the horizontal support at 0.68 level. Its uptrend will still be intact as long as it is able to stay above the rest of the MA lines which is now at 0.675 level.

In conclusion, STI is still comfortably staying at the gap support level. With such strong overnight closing by DJI, STI is very likely to benefit from the strength. Strong gap up can be expected for STI today. If STI is able to maintain its bullishness today, it might trigger bullish signal in the short term indicators again. Despite possible bullishness for today, the upside will still be capped as the trend remains downtrend. Immediate resistance for STI stands at 2640 level and it the gap up is so strong, STI might even head towards 2690 level to test it as a resistance. Henceforth, STI might be starting to form a lower low if today’s possible rebound is sustainable.

Long traders can adopt counter trend trades if the selected counter still offers good risk reward. If a strong gap up occurs, it might not provide a good entry price for good risk reward. Shortist might have already taken some profits from the short positions. The trailing stops for the short position is the key right now as it will determine whether there is chance of riding the short positions. Shortist should close their short positions if the trailing stops have been breached.