Daily Market Outlook for 15-Feb-2012

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STI managed to maintain it bullish streak yesterday as traders ignored the concerns of the European issues. STI opened flat yesterday and it experiences some selling pressure by profit takers during the morning trading session. However, buyers start to come in as soon as STI broke 2960 support level. This buying pressure caused STI to head back to its opening level and even went beyond the previous day’s high. Thus, STI managed to close at 2987 level, 11.07pts higher. Despite an intraday ‘V’-shaped movement, the trading volume was average yesterday. Last night, DJI plunge into red during opening session but it managed to recover and ended up only 4.24pts higher. Will STI be able to continue towards 3000 level and test this resistance level? Is it possible for STI to break out of 3000 level without a proper retracement?

STI ended with a white candle with long lower shadow. It exhibits similarity to white hanging man formation which is a bearish reversal candle. However, its lower shadow tested the immediate support level of 2960 and bounce off. This is an indication of a good support level that the market refuses to break for the past few trading sessions. Hence, this possible bearish reversal candle might not be able to start a deeper retracement if 2960 support is not broken. The short term indicators continue to show bearish momentum despite such bullish movement yesterday. This is an indication that STI is staging a sideway retracement and might continue to do so till a break out occurs. 3000 resistance level will continue to be tested as long as 2960 support level is not broken.

Most of the banks were trading higher yesterday as they continue to break out of their trading range. Ocbc was the exceptional one yesterday as it retraced deeper than the rest. Ocbc’s retracement target could be towards its 200ma line at around 8.64 level. Stochastic triggered bearish signal yesterday which will encourage it to head towards 200ma line. The offshores were mostly trading bullishly yesterday. Sembcorp and Sembmar broke for a higher high as they continues their uptrend movement. Kepcorp, however, is still struggling to catch up with its counterparts in the sector. Kepcorp continues to be resisted by 10.92 level and is unable to break it yesterday. There might be a good chance that Kepcorp will do catch up with the rest.

The properties were generally trading lower yesterday as they are still in the midst of a retracement move after their sharp rally. Kepland, which has confirmed its resistance at 200ma line, continues its retracement towards its immediate support level at around 2.94 level. Its earnings report had some impact on its price action yesterday. Most of the commodities were showing bullish strength yesterday as they might finish their retracement. Sakari tested its recent low level and managed to confirm it bullish reversal yesterday. This price action might lead it to head towards 200ma resistance level. Indoagri and Olam formed bullish white hammer pattern yesterday after they have tested their support level. There is a possibility that they might form a higher low formation if these candles are being confirmed.

In conclusion, STI will continue to head higher to test 3000 level in this few days as long as 2960 support level holds. It is now clear that STI is performing a sideways retracement again and this implies that STI is indeed in a very bullish trend. However, in such bullishness, possibilities of a deeper retracement can still happen as bearish divergence signs starts to appear. Trading volume has also starts to diminish which indicates the lack of market conviction while it heads higher. Henceforth, market is now in an indecisive mode and one should stay cautious until a clear break out occurs.

Long traders might choose to take some cautious trade on individual counters that had formed a proper retracement. Commodities & properties sector are good targets to look out for such counters. Long traders must establish a good stop loss level to avoid disappointment later. Shortist must be disappointed that the market did not have a proper retracement. If short position was made, stop loss level is adhering to as it can help to avoid deep losses.