Daily Market Outlook for 16-Feb-2012

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Yesterday, STI was in a bullish mood as market participants were positive of the upcoming outlook of the market. 3000 level was tested yesterday and was even broken during the day. There was some selling pressure initially but when 3000 level was broken, buyers start to flood into the market. Hence, STI is able to maintain its bullish momentum during the day and closed at 3011 level, 24.27pts up. Trading volume for the day was high too. Last night, DJI headed south as it is unable to maintain its bullishness as it is unable to break its recent high. Will STI be heading towards is next resistance level today? Or will STI break out be a false one and prices will start tumbling?

STI closed with a white candle with lower shadow yesterday. Its lower shadow action could be due to intraday gap covering action. This candle has also confirmed STI’s break out of its range of 2960 – 3000 levels with high volume. Hence, this break out could be sustainable as long as it stays above 3000 level for the next few days. Its short-term indicators are also looking healthy as they started to trigger bullish signals. These bullish signals might help STI to head for the next resistance level of around 3070 as long as they are being confirmed today. There is also a huge gap resistance between 3026 – 3105 which one should be aware of. This break out will fail if STI trades lower than 2980 today.

The banks closed strongly yesterday as they were one of the forces that pushed STI higher. UOB have at last closed above 200ma but it has yet to break out for a higher high. DBS is the only counter that manages to break out from its recent high and it is likely to head for another resistance level. Currently, only DBS triggered bullish signal in the indicators. The offshores were trading strongly yesterday as they continue to head for higher levels. Kepcorp, which had been facing trouble in breaking its recent high, managed to break out its resistance yesterday. Sembcorp and Sembmar are heading towards their major resistance levels and it might be where their lower high might be forming.

Most of the properties were able to enjoy the bullish sentiment yesterday as they managed to head higher. Citydev attempted to break its recent high but it came close to breaking it. Kepland is now at 200ma but it did not show a clean break out. F&N yesterday was the odd ball again as it failed to hold its support at 6.42 and it went lower towards its next support level. F&N might be targeting 50ma to hold as support. Most of the commodities were trading bullishly yesterday. 3 commodities were able to break out for higher high yesterday. They are Noble grp, Sakari & Wilmar. Noble grp is now getting closer to its 200ma line and might have trouble breaking that level. Sakari managed to break its 200ma resistance level and should be heading towards its next resistance of 2.58. Golden agri had a gradual retracement lately and it could be forming a higher low formation to prepare for more upside.

In conclusion, STI can still have strength to head higher as many counters were breaking out for higher high. Furthermore, bullish signals were triggered and it can help to fuel STI’s upside movement. Hence, STI is likely to head towards the next resistance level of around 3070 level and is entering a huge gap resistance zone of 3026 – 3105 levels. Numerous bearish divergence were seen in individual counters and this is something that one should take note of. STI is also experiencing bearish divergence even though it broke out yesterday. Henceforth, one should be cautiously bullish of the market. STI’s breakout yesterday will fail if STI goes below 2980 level for the upcoming few days. Breaking of 2980 level might trigger a deeper retracement.

Long traders might be enticed to enter based on break outs yesterday. Due to formation of bearish divergence, it might not be a wise move to long on break outs. If long positions are initiated, it is important that the stop loss level is tight. Shortist should have cut their losses short if they have short positions. Those whom fail to do so might want to make use of slight retracement to close their short positions.