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STI attempted to rebound yesterday despite the weak opening and trading day. STI gapped down slightly to 2900 level and it started to experience selling pressure during the late morning session in reaction to DJI’s previous night closing. This selling pressure caused STI to hit as low as 2883 level. When STI hit its intraday low, bargain hunters started to flow into the market again to pick up bargains which caused STI to bounce back towards its opening price again. This intraday rebound caused STI to close at 2904 level which is just merely 1.93pts low. Hence, STI closed flat yesterday. Last night, DJI had a bullish day and ended up 83pts higher. This could bring some bullish sentiment for STI and might help STI to break out is consolidation for the past few days. Will this really happen today?
STI closed with a white hammer pattern yesterday. It can be seen as a white hanging man pattern because it is now hovering at 200ma resistance line. However, its white candle body states that STI is still trading bullishly. Its long lower shadow indicates that it might have hit a possible support level and refuse to break it. Hence, the underlying strength might still be bullish. The short-term indicators continue to show bearish readings and STI is still undergoing retracement momentum. Although the retracement is not significant, STI could be forming flag like formation. Its current overbought condition might continue to dampen STI’s upside. Henceforth, STI might continue to consolidate between the range of 2880 – 2920 levels before it can go higher. Breaking out of 2920 level will indicate that STI’s upside to continue and it will head for the next resistance of 2950 level.
The banks continued their consolidation movement yesterday as they are lacking of catalyst to trade higher yesterday. Most of them we able to rebound off from their lows yesterday and managed to recover back higher than their opening levels. There might be a good chance of them breaking out of their consolidation range today. The offshores were trading weakly yesterday as they are still retracing to their support levels. Most of them are now close to their support level and were holding well. Some lower shadows were seen and this can indicate its support level formation. What is lacking now is formation of bullish reversal candle to help them to trade higher again.
The properties continue to retrace yesterday as they were still attempting to find a support level. Majority of them formed lower shadows and this might indicate that they might be ready to rebound from their support level. Citydev is now trading between 100ma & 200ma with a flag formation. If it manages to breakout from this flag formation, it will continue its uptrend. Most of the commodities were trading strongly yesterday. Despite their weak opening, majority of them managed to rebound from their lows and close higher. Olam and Wilmar managed to confirm their bullish candle and head higher. This would mean that they have already formed a higher low and should be heading to form a higher high formation. Indoagri and Noble grp are now sitting at support levels and might be ready to follow Olam and Wilmar to form higher low formations.
In conclusion, STI will likely to continue to consolidate between 2880 – 2920 levels today. There is also a chance of breaking out from this consolidation range. Breaking out of this range depends on the strength of various sectors. The leading sector should be the banking sector and the offshore sector. If they are able to break their range today, STI should be able to head for its next resistance level. STI’s next resistance level now stands at 2950 if 2920 resistance is broken. Commodities can also be another possible sector to start its bullish movement as most of them are now at their support levels. STI’s retracement could have ended.
Long traders can continue to look for counters to go long. Breakout strategy can be adopted at this point in time as there are numerous flag formations. Going long at counters at support levels can be found in the commodities sector. Shortist must be aware that there is a higher chance of STI heading higher. Hence, shorting should be avoided to prevent losses.
