Daily Market Outlook for 10-Jan-2012

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Yesterday, STI started the week with a gap down as traders rushed to take profit after a bullish week. Selling pressure was seen early in the day till lunchtime and caused STI to reach as low as 2683 level. STI could have attempted to test the support level at 2680 level. STI managed to receive bullish boost by HSI as HSI reversed to strong bullish sentiment after lunchtime. This caused STI to rebound back towards the previous trading session’s closing. However, the buying pressure was unsustainable and caused STI to retrace again before closing. Thus STI ended at 2691 level. 2680 support level managed to hold well. Last night, DJI closed slightly higher with 32pts up. Will DJI’s positive closing bring some positive sentiment for STI today? Has STI ended its retracement and is ready for a rebound?

STI ended with a short black candle with both upper and lower shadows. This candle indicates the indecisive bearishness sentiment that STI encounters. This indecisive behaviour could be because STI is trading near to its support level of 2680 level yesterday. However, its negative closing has confirmed its retracement move and its retracement is likely to continue. Both Histogram and Stochastic triggered bearish signal and this indicates that STI is ready for further retracement after yesterday’s drop. Henceforth, STI is likely to continue to head towards 2680 support level to test it as a support. This 2680 support level remains a key level for STI’s to develop an uptrend price movement.

The banks ended mostly lower yesterday as they failed to gain any bullish strength during the day. UOB which has been trading below 20ma traded towards its recent low and is threatening to break for a lower low to start a downtrend movement. Its key support level at 15.10 must hold or else it will be going for a downtrend movement. The offshores generally ended lower yesterday despite several attempts to trade higher during the day. Kepcorp and Sembmar closed with white candle yesterday. This white candle closing indicates that there might still be bullish strength in their current uptrend movement. As they are trading closely to their immediate resistance level, there might be a chance that they will break their immediate resistance level to go for a higher high.

The properties ended lower yesterday but despite its negative closing, most of them managed to recover from their lows and ended higher than their opening price. This indicates that their support levels are holding as price refuses to trade lower. Citydev had recovered above 20ma again with a very tight Bollinger squeeze. Breakout of either way might happen very soon. The commodities had a mixed market yesterday as they traded with their own sentiment yesterday. Golden Agri lead show bullish strength yesterday but failed to break its resistance level of 0.735 and ended up lower. Sakari exhibit a breakout yesterday as it attempted to chase Olam’s bullish movement last week. The worst performer was Noble grp where concerns of its future prospect start to shake again. Noble grp broke its recent low and it will likely be heading to form a lower low level.

In conclusion, the expected retracement for STI has started after yesterday’s negative closing. Bearish signals from the indicators will likely to encourage STI to take on the bearish side. However, key support level of 2680 is expected to hold well in order for STI to form an uptrend formation. Bearish pressure could be seen in the bank and properties sector as they were not showing clear signs of bullishness. Offshore sector might provide some bullish strength to STI as they are poised to head higher for this week. Henceforth, STI might start to experience a mixed market today while odds are still on the bearish side until it tested 2680 support level.

Long traders can start to look out for counters that were trading close to their support levels to consider for a long position. Long positions should be entered when there is clear bullish signal and tight stop loss should be adopted. Shortist should make use this retracement opportunity to close their short position to avoid it to turn into losses. Entering short position right now might not be wise as chances of downtrend continuation have significantly weakened.