Daily Market Outlook for 10-Feb-2012

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STI ended up flat yesterday as traders started to be cautious of the weekend and the recent strength in the market rally. STI opened with a gap down initially and test resistance turn support level of 2960 before it started to rebound back. The underlying bullish sentiments were still holding the market and hence, STI was able to rebound back close to the previous day closing price. Hence, STI closed 1.03pts lower after its bearish start yesterday. Trading volume was significantly high as penny stocks were hogging the top volume board. Last night, DJI experience a flat trading session as it ended up only 6.51pts higher. As weekend is nearing, will selling pressure sets in today? Or will STI be persistent and test 3000 resistance level today?

STI formed a white candle with both upper and lower shadow yesterday. This candle formation signifies that the bullish sentiment is starting to get indecisive. This could be because STI is approaching its resistance level of 3000 level. The short term indicators are starting to show weakening of its bullish momentum. Stochastic, in particular, is starting to show a possible bearish crossover in the overbought region. Therefore, one can conclude that STI might have trouble breaking this 3000 resistance level and a higher high have higher chances of forming at this resistance level. What is lacking right now is bearish formation or bearish signal at 3000 level.

The banks were trading mixed yesterday as traders continue to avoid trading this sector yesterday. Ocbc was the only bank that shows strong bullish strength yesterday as it managed to break for a higher level yesterday. However, Ocbc immediately faced resistance from its resistance level of 8.85 level, but it is certain that it will be forming a higher high currently. Uob continues to face problems breaking the 200ma resistance line yesterday. The offshores continues to gain some bullish strength yesterday with exception of Sembmar. Sembmar faced resistance at 5.10 level and it retraced with a gap down yesterday. This caused Sembmar to form a bearish harami formation and might force it to retrace toward support of 4.90. The rest of the offshores were also starting to form weakness in its bullish movement.

The properties were trading bullishly yesterday as they continued their bullish streak. Capitaland enjoyed the most buying strength yesterday as it manages to break its resistance level and is now heading towards another. However, Capitaland is now facing a stronger resistance level at 2.95 and it might have trouble breaking it. F&N did not manage to stay at 20ma support yesterday and instead, it head towards its horizontal support level of 6.40. Traders must be anticipating F&N’s weak earning results that was announced after market closed. The commodities were struggling to head higher yesterday as they are starting to lose their bullish steam. Sakari and Olam closed with bearish reversal formation and they might start to experience retracement if confirmed. Noble grp seems to have trouble breaking its resistance level at 1.48 level and might also form a higher high formation.

In conclusion, STI’s is now getting limited and might not be able to clear 3000 resistance level. Numerous sectors are showing signs of bullish fatigue and might not be able to find strength to go higher anymore. The odds of retracement are getting higher right after an extended rally seen in STI. With the upcoming weekend, traders might start to get more cautious and start taking some profits from the market and this can create some selling pressure for STI today. Immediate support level for STI now stands at 2960 level but the strong support level is at 2920 level.

Long traders should be encouraged to take partial profits from the market as the market is starting to show signs of weakness. Adding long positions right now is not a wise move. Shortist should starts searching for counters that are trading at resistance level with bearish formations. Counter trend short positions can be initiated once there is confirmation of bearish formations. Shortist should be reminded that downside can be limited and quick profit taking should be enforced.