Daily Market Outlook for 23-Dec-2011

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STI ended slightly lower yesterday as traders stay cautious after the DJI ended flat the night before. Trading volume was dull yesterday as many traders avoided entering the market with the upcoming Christmas holiday. Thus, STI ended up merely 8pts down yesterday. Last night, DJI managed to continue its bullish movement by closing 61pts higher after the Europe market also closed in the positive region. Fears of Euro crisis has been fading for the past few days. With the upcoming Christmas holiday, will STI be able to trade higher today to end the Christmas rally? How far can STI go this time round?

STI ended with a short white candle yesterday. Its short candle body indicates its lack of trading action. The trading action was poised more to the bullish side due to the white candle formation, despite it ending lower yesterday. Therefore, the bullish momentum can still be deemed to be intact. Short term indicators were also indicating its continuation of its bullish momentum yesterday. Histogram bullish signal was also confirmed and this would indicate further upside for STI. However, STI will continue to face horizontal resistance at 2690 level where 20ma is also trading near that level.

The banks did not trade higher yesterday as they faced some profit taking pressure. Ocbc was unable to break 20ma line and ended with a black candle. This indicates that Ocbc’s 20ma could be a strong resistance. Uob, which is the only counter that is trading above 20ma, retraced and ended at 20ma support line. A break below 15.42 level would indicate weakness in its rebound. The offshores were able to trade slightly higher yesterday after it’s struggled to trade higher the previous day. Kepcorp and Sembmar were able to trade slightly higher than 20ma yesterday and if it is able to maintain above the 20ma line, they will be able to head towards their next resistance levels.

The properties were generally trading flat or down yesterday. CItydev and Kepland ended lower yesterday as they continued to suffer the after effect of the property curb. Their stochastic indicators are starting to form bearish signal and could be a warning sign that they might continue their downtrend movement. However, they are not trading at any significant resistance levels and therefore, it is still hard to tell if they will continue their downtrend at this point in time. The commodities ended flat generally yesterday as they experience uncertainty on their directions. Golden Agri was able to recover above its 20ma yesterday after it tested the horizontal support level. It might still have bullish strength to continue its uptrend at this point in time. Noble grp is still in trading halt yesterday and is likely to lift it halt today after Yanzhou takeover of Gloucester.

In conclusion, the anticipated Christmas rally is likely to continue for STI today as the bullish momentum is still intact. 2690 resistance level will continue to cap STI’s upside today despite the bullish momentum. Cautious trading will likely to continue today as traders will be wary of the Christmas holiday. Hence, some selling pressure can be expected when market come to a close today. The key sector to maintain this bullishness will be the banks and properties. If the banks fail to maintain its bullish momentum, it will drag STI down. Similarly, the properties’ downtrend momentum, which has a risk of continuation now, can greatly affect STI’s bullishness. Hence, identification of both sector’s support levels are important now.

Long traders have to continue to watch the opportunity being missed from the sidelines. Temptations to enter long trades now are high but it should be avoided as STI is nearly its major resistance level. Shortist can continue to watch out for shorting opportunity today as the market is nearing resistance level. Properties sector can be a good target to watch out as its indicators are starting to show bearishness.