Daily Market Outlook for 4-Jan-2012

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STI started the year with strong bullish movement yesterday as participants were anticipating Capricorn effect to happen. STI opened with a gap up and buying pressure was seen throughout the day. Positive Europe opening also helped STI to stay strong and hence, STI ended at 2688 level which is slightly below 2690 resistance level. Trading volume was higher comparing to the holiday period but is still below the average. Last night, DJI also ended with strong positive note for the first day of the year. DJI closed 179pts higher. This positive start is likely to bring more positive mood to STI today. Will STI be able to break 2690 resistance level and head higher? Is STI’s trend starting to change?

STI closed with a long white candle after a black candle on last Friday. This bullish movement have confirmed the gap support between 2628 – 2650 levels. Furthermore, STI even managed to close higher than the recent high of 2880 level. This could possibly be a break for higher high with a higher low being formed. In another point of view, STI might still be forming a lower high formation and recent movements are just whipsaw actions. To further confirm whether STI is forming an uptrend, a clearer higher low formation is needed. The immediate resistance level for STI stands at 2690 level and this level confluence with 20ma resistance line. If STI is able to break this resistance level, it will be heading towards 2740 where it is a strong resistance level. Based on the indicators, the indicators were showing bullish signals and this could encourage STI to break 2690 resistance level. Yesterday’s rebound also helped to show RSI’s bullish divergence formation. Henceforth, STI might have a high chance to continue its bullishness and head towards 2740 resistance level.

The banks were able to recoup their last Friday’s losses and close higher yesterday. They ended at their respective 20ma resistance level and were unable to break it yesterday. Uob is now showing a triangle formation with Bollinger Squeeze. This formation can lead to breakout of either way. Its 50ma resistance level will be the key to watch for upside breakout. The offshores open with strong gap ups and ended even higher. Kepcorp managed to stay supported by the 20 & 50ma line with a bullish reversal formation. This could indicate that it might continue its uptrend movement and head towards the next resistance level of 10.00. Sembcorp and Sembmar were still struggling to break its 50ma resistance line. With bullish indication in their indicators, there is a good chance that it might be able to break it and head for their resistance levels.

The properties were able to recoup their Friday’s losses with some ended slightly higher. There were no strong bullish movement yesterday as the property curb concerns continue to plague the property market. Citydev and Kepland came close to their recent high and 20ma line. If they are able to break these resistance levels, they might have a chance to reverse their trend. The commodities were able to end up higher yesterday. Indoagri and Wilmar were able to break their 20ma resistance level and this might end its downtrend movement. However, their 50 & 100ma might cap their upside movement before they can head higher. Golden Agri’s uptrend remains healthy and it might have a good chance to head for a higher high as long as its resistance at 0.73 level breaks.

In conclusion, the expected selling pressure did not happen yesterday and the movement yesterday have reversed the market sentiment abruptly. Downtrend movement could have come to a halt and there could be a possibility that STI might reverse to uptrend. The key now is whether STI will form a clear higher low formation. With bullish signals from the indicators, STI is likely to continue its bullish movement towards next resistance level of 2740 as long as it manages to break the immediate resistance of 2690 level. Henceforth, one should expect the market to start moving abruptly again as this could be a possible trend reversal point.

Long traders can watch out for counters that had broken for a higher high to go on the long side. Therefore, breakout strategy is to be adopted right now. Due to the risky nature of breakout strategy, one should be prudent on the position size. Shortist should be concern of the short side as bullish divergence signal is starting to show its impact on the downtrend. Adding new short positions should be avoided while existing shorts should have tight stop loss levels.