Daily Market Outlook for 14-Feb-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 started the week bullishly after concerns of Greek debts starts to ease after numerous measures were introduced. STI opened with a slide gap up with numerous attempts to trade lower. However, bargain hunters came into the market to push STI higher which resulted in STI closing at 2976 level. STI ended 16.34 higher. Despite such bullish movement in STI, the trading volume was not high but trading on the average. As the immediate support level of 2960 was test last Friday, will yesterday’s movement be an indication that STI has completed its retracement and ready to head higher again? Or will STI continue to prepare itself to go for a deeper retracement?

STI closed with a white candle yesterday. This candle did not confirm STI’s bearish engulfing formation last Friday. Failure to confirm the bearish reversal formation is an indication of a strong underlying bull. However, despite STI ended with a positive day, the indicators were not showing bullish strength, but instead, they are showing bearish momentum. This contradicting reading had happened previously and it resulted in a sideways retracement. There is a likelihood of it happening again this time. Hence, STI might be trending in a range between 2960 – 3000 levels before it can go for another higher level. Breaking of 2960 support will be an indication of a deeper retracement to happen.

The banks, again, were trading flat and were lacking of trading interest yesterday as the trading volume were low. UOB, yet again, failed to break the 200ma resistance line after its attempt to break it for the whole week. It is likely to continue its break out attempt today. Ocbc closed with a dragonfly doji formation which signifies its indecisiveness of heading high. It could be a sign that it is hitting a resistance level and might not be able to head higher for the next few trading sessions. The offshores were trading bullishly yesterday as they recovered part of their losses last week. However, they did not manage to break their recent high. Sembmar was seen to be trading strongly yesterday as it attempted to break out of its recent high. It had managed to close 2cts higher but average trading volume does not make it seems to be a convincing one. If Sembmar is able to stay above 5.14 level today, it might have a good chance of heading higher.

The properties managed to recover some of its previous day’s losses as most of them managed to rebound strongly. Kepland did not manage to recover strongly and ended up flat. It struggled to head higher but failed to do so as it is facing strong resistance from the 200ma line. Its chances of retracement are high and it might be heading towards 2.90 support level if its higher high formation is being confirmed. Numerous commodities ended flat yesterday as they were unable to find strong reasons to head higher. Many of them were still trying to find their support levels to form higher lows but their lower shadows are giving hints that the support level is near. Olam had already retraced close to its 20ma line and might form a higher low there. However, bearish divergence is seen in the indicators and it might not be able to retain its current uptrend.

In conclusion, STI’s movement yesterday might be a re-attempt to test 3000 resistance level as it was not tested last week. The indicators were showing conflicting results and it might indicate a sideways retracement for STI. However, as the retracement formation is still young, we also cannot rule out that STI might not go for a deeper retracement. Hence, STI is likely to trade sideways within the range of 2960 – 3000 levels. Numerous sectors were hitting resistance level and were unable to break it yesterday. However, a handful of commodities counters are now trading close to their support and it might bring some strength to STI. The main draggers for STI will likely be the banks or the properties. 2960 support level will now be the key level to determine whether STI will be heading for a deeper retracement.

Long traders can make use of the rebound yesterday to take better profits off the market. Chances of retracement are still high right now and hence, adding long positions is still not a good choice. Shortist might be shaken by yesterday’s rebound after expectation of retracement with counter-trend shorts. Stop loss for short positions should be designed to avoid sudden reversal in the sentiment.