Daily Market Outlook for 11-Jan-2012

*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 was trading in a bullish mood yesterday instead of the expected bearish sentiment. STI was not only buoyant by the positive closing by DJI the previous night; it was also encouraged to trade higher by the strong performance by HSI during the day. STI opened with a strong gap up and this gap up managed to maintain for the whole day. Positive opening from the Europe market further encourages STI to trade higher before closing and hence, STI ended up 28 pts higher. Trading volume had significantly increased yesterday. Last night, DJI closed 69pts higher after numerous strong corporate earnings are announced. STI should be able to attain a bullish start today. Will STI be able to retain its bullishness despite a short retracement?

STI closed with a white candle that gapped up from previous day’s closing. However, gap support was not formed as there is no creation of gap openings. The abrupt change from bearish candle to bullish candle signifies a possible change in sentiment which could be due to STI’s bullish underlying. Its mid-term indicator, MacD, has tested the 0 line yesterday which have assured that STI’s downtrend is no longer intact. The short term bearish indicator has also turned back to bullish momentum as it fails its bearish signal the previous day. Henceforth, STI might have ended its retracement with a short movement and could be heading towards 2740 resistance level again. A higher lower could have been formed as long as STI does not trade below 2680 level for this few days.

The banks rebounded strongly after it had retraced the previous day. Uob managed to avoid trading below its support level and rebounded towards its 20ma line. Its 20ma is now relatively flat and this indicates that Uob is now trading sideways and its retrace could be towards its recent high of 15.70 level. Ocbc continues to should bullish strength as it manage to propel itself towards its 50ma resistance line at 8.09. The main bulk of STI’s surge was due to the strong bullish performance by the offshore sector. Kepcorp leads the strong surge as it announced a bumper contract the previous night. Sembmar also follow suit and even outperform Kepcorp’s movement. Both of them broke out from their strong resistance level yesterday and this will lead them to continue their uptrend movement.

The properties have managed to enjoy strong bullish movement after weeks of low activity. Citydev and Capitaland have managed to break their sideways resistance level and might be heading higher to form a high. The Bollinger band squeeze is now taking its effect and this might give Citydev and Capitaland strength to propel higher. The commodities continue trade in a mixed fashion where there are selective bulls. Sakari continues its bullish streak and it manage to test 50ma resistance line which might prevent Sakari from going higher. Indoagri managed to trade above 50 & 100ma convincingly and managed to break its recent high resistance level of 1.345. Indoagri’s trend might have change to uptrend if this breakout is sustainable.

In conclusion, the strong bullish movement yesterday failed the bearish signal triggered by the indicators yesterday. Failure of bearish signal is a possible indication that the market trend could have been change to an uptrend. STI could have also formed a higher low formation despite a 1 day retracement only. Hence, the last confirmation level for STI to confirm its uptrend formation would be 2740 resistance level where there is confluence of both 50 & 100ma resistance line. Henceforth, STI can be expected to head towards this resistance level and test it with a good chance of breaking this resistance level. 2680 remains a key support for STI to retain its bullishness.

Long traders can continue to search for counters which are trading at their support levels to initiate a long position. Entering base on breakout can also be used but good risk reward ratio must be attained before entering the position. Shortist should have already closed their short position as the bullish underlying is not a good situation for a short position. Shortist should avoid the short side currently.