Daily Market Outlook for 18-Jan-2012

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STI went against the odds yesterday as it surged strongly causing Shortists to scramble out of the market. STI gapped up in the morning and surged steadily during the day. During the day, STI tested 2790 resistance level again and it broke the resistance level easily. The broken resistance level caused even more buying pressure to enter the market and thus, STI closed at 2815 level, 59pts higher. The resistance level of 2790 has confirmed been broken as STI broke it with high volume. Last night, DJI recovered from its losses and ended 60pts higher. The buying sentiment was not as strong as what happened in STI yesterday. Will STI’s bullishness be able to continue today? Or will it be the start of a retracement again?

STI closed with a long white candle with high volume yesterday. This long white candle signifies that STI is experiencing strong bullish momentum which caused it to break its immediate resistance at 2790 easily. Based on the short term indicators, yesterday’s price action caused it to turn bullish again. Bearish signals failed to confirm yesterday as price reversed strongly. RSI and Stochastic re-entered the overbought region and might start to stay within the region again. Hence, 2790 resistance level which has been broken will now act as a new support level for STI. Furthermore, 2740 is likely to get stronger as 20ma line is starting to rise towards it.

The banks were able reversal their losses and even surge much higher yesterday. Their bullish movement helped STI to break its resistance level yesterday. UOB & Ocbc have managed to break above its 100ma line and this signifies that its weekly trend would have turned away from downtrend. However, they have reached their immediate resistance level and might not be able to surge higher. The offshores continues their bullish streak yesterday as they continue to surge higher despite the overbought condition they are in. Sembcorp closed slightly above it 200ma line while Sembmar has surged beyond its 200ma line. As the offshores’ resistance level is still a distance away, they might continue to head higher.

The properties also recovered their previous day’s losses yesterday as the general market sentiment remains bullish. F&N bounced off the 20ma strongly yesterday causing it to break its immediate resistance level quickly. CItydev & Capitaland also managed to break its past few days’ high and they will be heading towards their 50ma resistance line. Kepland is now above 50ma and will likely to stay supported by the 50ma line. The commodities started to attract trading interest into its sector as the sector’s volume starts to pick up yesterday. Indoagri, Noble grp, Olam and Sakari enjoyed strong surge yesterday as sentiments for commodities starts to pick up again. Noble grp, which has been facing downtrend risk, managed to break 20ma yesterday and tested its recent lower high level. Testing of recent lower high level have made Noble grp’s trend to turn into sideways. Hence, Noble grp’s downtrend might come to a halt.

In conclusion, STI, indeed, had surprise many yesterday as it surged strongly yesterday. This strong surge is a market of an uptrend market and it strongly confirms that this uptrend will be sustainable. STI’s immediate support level has shifted to 2790 level and the key support level for STI will now be 2740 level. Going forward, STI will still have strong chances of hitting its immediate resistance level of 2840 level. The bank and commodities sector will be the contributing sectors to help STI to reach its resistance level. Offshore sector seems to have over-extended its bullish run but will come to a halt once they have reached their resistance levels.

Long traders could have missed the opportunities to enter long position as the surge was unexpected. Adopting breakout strategy can still be adopted to enter the market right now but good risk and reward must be calculated. Shortist must have been whipped out by the market’s strong movement yesterday as numerous counters have hit its shorting stop loss levels. Shortist whom has missed to close their short position should make use of any minor retracement opportunity to exit the market.