Daily Market Outlook for 17-Feb-2012

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STI was in the state of selling momentum yesterday as the market reacted strongly to the drop in the US market the previous. Fearing of the delay in Greek’s bailout deal, traders decided to take some positions off the market. STI opened with a gap down and it did not managed to recover during the day. Selling pressure continued throughout the day causing STI to trade below 3000 level and even hit as low as 2973 level. STI closed at 2977 yesterday with slightly above average volume. Last night, DJI managed to gain back 123.13pts, recovered most of its losses during the previous day. Will STI be able to regain back its losses after yesterday’s drop? Will STI be able to stay above 3000 level again?

STI ended with a long black candle which can be deem as a one black crow formation. With its failure to stay above 3,000 level and formation of bearish candle pattern, STI might still be facing resistance at 3,000 level despite it being broken the previous day. Based on the indicators, the indicators were not able to confirm their bullish signal yesterday and instead it turned into bearish reading. The bullish signal had failed yesterday. This could mean that 3,000 level is still resistance STI and STI might struggle to break this level for the upcoming days. If STI confirms the bearish reversal pattern today, it will mean STI will be going for a retracement. Confirmation of retracement will happen if STI trades below 2973 level.

The banks returned much of its gains yesterday as most of them failed to break their immediate resistance levels. Uob is now back below 200ma and its previous day’s price action could be a whipsaw action. DBS, which managed to break out, return back to its break out level and might be testing it as support. If this resistance turn support level of 13.68 fails to hold, it will mean that DBS is going for a deeper retracement. The properties were trading lower as most of them were unable to break their immediate resistance levels. Kepland continues to face 200ma resistance level yesterday and is unable to break it yesterday, if it is able to break above 3.10 level, it might be heading for a higher high level. However, due to its bearish divergence signal, it might have trouble breaking it. F&N with has been an odd ball, continue to slide down further yesterday. It has now reached the 50ma line and might be able to attain some support here.

The offshores were unable to head higher yesterday as the general market sentiment turns of to be bearish. Sembcorp and Sembmar formed bearish harami pattern and if confirmed, they might be starting a retracement. Kepcorp failed to sustain its breakout and it retraced strongly towards 20ma. 20ma might provide some support for Kepcorp today. The commodities were trading mixed yesterday as some were reacting bullishly while some reacted bearishly. Sakari managed to continue its breakout after it broke 200ma on the previous day. However, its formation of upper shadow is showing that it might be hitting a resistance level. Olam was the most bearish one as it broke for a lower low yesterday. Trading volume was high and it might have confirmed its downtrend movement. Wilmar formed a bearish harami pattern yesterday after strong surge on previous day. If confirmed, Wilmar might be heading for a retracement.

In conclusion, STI might continue to face resistance at 3,000 level today. Due to the recovery of DJI last night, STI might be able to find some strength to recover some losses. However, as today is Friday, some selling pressure can be expected before market closes. Hence, STI is unlikely to trade above 3,000 level today. Given that STI formed a bearish reversal pattern yesterday, if STI trades lowers than 2973 level today, chances of STI starting a retracement will be high. Henceforth, do expect STI to be struggling close to 3,000 level today.

Long traders should continue to wait out until a clear retracement is formed. Breakout trade might be enticing but it might not be worthwhile right now. Shortist should stay alert on counter trend shorting opportunities. But Shortist should take note that counter trend trades will be best combined with bearish divergence signals.