Daily Market Outlook for 9-Feb-2012

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STI has successful break out of 2960 resistance level as the offshore sector successful gain bullish strength after consolidating for the past weeks. STI was able to open with a slight gap up after DJI showed positive closing the previous night.  Bullish trader flooded the market during the day and it managed to push the prices higher without signs of selling pressure. With the bullish sentiment during the day, STI is able to close at 2982 level, 24.42pts higher. Trading volume was also significant higher. Last night, DJI recovered from it bearish opening and climbed back to the positive territory to end 5.75pts higher. This shows the reluctance of trading lower for DJI. Will STI be able to maintain this break out of 2760 resistance level today? How far will STI head before a retracement occurs?

A long white candle without upper shadow was formed yesterday. White candle without upper shadow signifies a decisive bullish market where there is no sign of bearishness. This can also imply that STI has clearly broke out of 2960 resistance level and 2960 will most likely be able to turn into a good support level. The short term indicators have confirmed their bullish signal and started to turn into short term bullish momentum. This will likely propel STI to go higher in the next few days. Henceforth, STI is now ready to trade higher towards its next resistance of 3000 level before it can have a chance of retracement. 2960 resistance turn support level will be the key level to determine if whether STI will have the strength to test 3000 level in upcoming days.

The banks attempted to break out of their consolidation range yesterday. Ocbc has successfully broken out of 200ma line but it has failed to break out of its recent high. Hence, it might not be heading for a higher high formation yet. There is still a risk that it might retrace slightly to test 200ma again before it can have a decisive break for the upside. Uob had at last tested the 200ma line but it failed to break yesterday. 200ma might prevent Uob from heading higher for the next few days. The offshore were trading bullishly yesterday and it contributed greatly to the break out of STI. Sembcorp managed to continue its upside movement strongly. Sembmar managed to break out from its sideways range is going for a higher high. Kepcorp also attempted to break for a higher high yesterday.

The properties were the other sector that is responsible for the breakout of STI. Capitaland managed to break out from its resistance level and is now heading to the next resistance level of 2.86 level. Citydev also ended up strongly and will be heading towards the next resistance level of 10.90. Despite bullish movement in the properties sector, F&N is the only one that reacted differently. F&N continues its retracement and is now close to the 20ma support level. F&N could be starting to form a lower low formation currently at 20ma and it might continue its uptrend at this level. The commodities were trading mixed yesterday as most of them have reached their resistance levels. Golden agri performed strongly yesterday as it broke its immediate resistance level. However, it immediately met its next resistance at 0.80 level. Noble grp has reached its resistance level and might have problem breaking this resistance level as it starts to form bearish candle. It might be retracing to close the gap support it has formed.

In conclusion, STI is set to go higher for the upcoming trading session as it has broken the resistance level of 2960. STI should be heading towards 3000 resistance level before it can have a chance of higher high formation. However, 2960 resistance turn support level will now be the key to determine whether STI will be able to reach 3000 level. The commodities sector might create a drag to STI for the next few trading session as they have reached their resistance level and might have a risk of retracement. But if the banks are able to break their resistance levels, it will bring a countering effect and might even push STI to 3000 level. Hence, the banking sector is still the key to determine whether STI will be able to reach for a higher level.

Long traders should be focusing on profit taking as the market is nearing its resistance level. Adding new long position might not be wise now as many might not yield good risk and rewards. Shortist should continue to stay sidelines until a clear bearish signal is seen.