STI gapped up strongly after the US’s better than expect job data was announced. Traders make used of this opportunity to push the price higher. STI opened at 2948 level which immediately broke the resistance level of 2920. It tried to push higher during the early trading session which reached as high as 2959 level before selling pressure starts to set in again. Selling pressure starts after lunch as Europe market opened slightly red causing some concerns in the market. Hence, STI closed at 2940, 22.15pts higher with significant trading volume. Last night, DJI struggled to stay bullish but it still remains 17.1pts down after opening much lower. Will STI be able to sustain its gains today? Or will STI do its gap covering action today?

STI closed with a black candle with upper shadow after a strong gap up movement. This candle indicates that STI faces some selling pressure and might be facing a resistance level. The immediate resistance level for STI is now deemed to be at 2960 level. The short-term indicators are still showing bearish momentum but they are starting to weaken. Stochastic is starting to show a possible bullish crossover and if STI trades higher today, it will confirm the crossover to trigger a bullish signal. With a bearish candle pattern, there is a chance of STI to retrace slightly to close the gap it had created. 2931 – 2939 levels will be the gap support range which STI might try to cover it either today or the next period. With possible bullish crossover in the Stochastic, STI might continue to attempt to higher high and test its immediate resistance level of 2960.

The banks attempted to trade higher with a gap opening but they failed to sustain their gains and closed lower than their opening. Ocbc even failed to close in the positive region which ended up 4cts lower. Its candle formation had caused it to form a bearish dark cloud cover formation. At the same time, this formation formed at 200ma line and this could mean that Ocbc is facing strong resistance from 200ma. Selling pressure is to be expected for OCBC. The offshores were performing strongly yesterday after they struggled to trade higher last week. Sembcorp managed to exhibit a break out yesterday and it should be heading towards its next resistance at 4.90 level or even 5.00 level. Kepcorp formed a clear higher low formation and it is likely that it will seek its immediate resistance to break it to form a higher high. Immediate resistance of Kepcorp stands at 10.85 level.

Most of the properties managed to trade higher yesterday despite the market experiencing some selling pressure yesterday. Capitaland is one of the stronger performers yesterday as it attempted to break the 200ma resistance line. However, it failed to break it yesterday and might attempt to break it again today. Citydev on the other hand, managed to break with a gap up yesterday. Citydev have also achieved a higher high breakout and should be heading for the next resistance level to form a higher high formation. The next resistance level for Citydev will be around 10.58 level. The commodities continue their strong performance yesterday as many managed to break out for a higher high. Noble grp and Golden agri managed to break their recent high and confirmed their continuation of uptrend for a higher high. Olam and Sakari which has been in the limelight failed to break their recent high and ended up with black candles. If they manage to break out from their recent high resistance level, it will bring more upside to these 2 counters.

In conclusion, STI had managed to break 2920 resistance level with a strong gap up. A gap support has now been formed at 2931 – 2939 levels. There is a possibility of STI retracing to close this gap support but there is a higher possibility that STI will head higher as there is bullish indications in the indicators. 2960 is the immediate resistance level for STI as it struggled to break it yesterday. In order for STI to break this resistance level, the banking sector must be performing bullishly in order for it to happen. Hence, the banking sector is the key on whether STI will be able to break its immediate resistance level. Currently, the rest of the sectors are still enjoying their bullish runs and they will help STI to maintain above 2920 level.

Long traders should start to be careful in selection of counters to long. Numerous counters have already bounced off their support level and break for a higher high. Breakout strategy can be adopted right now but it might not yield good risk and reward. Shortist have to stay sidelines for the time being until there is weakening in the current bullish sentiment. Resistance level should be eyed for bearish candle patterns.

Flat trading week have set many market participants pondering whether STI had a proper retracement. Many were still waiting for STI to hit a much lower support level to enter long positions. Will that happen? Or will STI be able to break out of this range and head higher this week?
STI’s chart should give us hints of the direction for this week.

Trend: Uptrend, 20ma up, MacD above 0

Support: 2890 (200ma), 2850, 2790

Resistance: 2920, 2960, 3000

Observations:

Candlestick – Small white candle with upper shadow.

Histogram – 5Rs. No bearish divergence seen.

RSI – Around 75%. Overbought for 2 weeks. No bearish divergence seen.

Stochastic – Around 66%. Possible bullish crossover forming.

Bollinger Band – Between mid and upper band. Band continues to open up.

Conclusion:

STI’s attempt to retrace towards 2850 failed to materialise as the support level at 2890 stays firm. STI first few trading days for the week shows that 2890 support level will hold well as there are lower shadow formations. Lower shadows indicate that the market is testing its support level but failed to trade lower than the support. During the early week, STI also faced resistance from the 200ma line which continues to trend downward, which prevented STI from heading higher. The key turning point happens last Friday as STI is able to gap above 200ma line and stay above it. However, STI immediate faces resistance at the horizontal resistance of 2920 and was unable to break it. But its attempt to stay above 200ma is already a bullish movement for STI.

The mid-term indicators continued to show bullish indications and are unlikely to weaken for now. Breaking of 200ma resistance line is also another clear indication that the uptrend is likely to remain sustainable. Short-term indicators on the other hand were showing bearish momentum despite that STI did not retrace much. This is an indication that STI is performing a sideways retracement and it can be a good form for retracement for the market. Sideways retracement is also a sign of very strong uptrend that is likely to be sustainable for another league of upside movement. RSI which has been in the overbought position for 2 weeks might continue to remain overbought for the time being.

As STI could be doing a sideways retracement right now, STI might be ready to break for a higher high level. In order for STI to go for a higher high, it must break out of its consolidation range of 2880 – 2920 levels. Hence, 2920 resistance level will be the key for STI to break for a higher high. The short term indicators are starting to show the weakening of the bearish momentum and bullish pressure is starting to build up. If STI is able to break 2920 this week, it will trigger bullish signal in both Stochastic and Histogram and these will greatly encourage further upside to be seen. If this is true, STI will be heading towards its immediate resistance level of 2960 level or in the best case scenario, head towards 3000 resistance level.

On the other hand, if STI decides to stay stubborn, it will continue to stay in the sideways range between 2880 – 2920 levels. If this is true, STI might continue to consolidate this week before a clear breakout can be seen. Downside risk is now minimal as the support level at 2890 will be a strong level as the trending 200ma is at 2890 support level. Therefore, odds are still on the bullish side and breakout of 2920 level is more likely to happen for this week.

In conclusion, STI could have completed its retracement movement via a sideways formation. This can be a very bullish sign as there is no existence of deeper retracement. Lacking of deep retracement indicates that the market sentiment is very bullish and this is very likely to happen right now. The key for STI right now is the 2920 resistance level. If STI is able to break 2920 resistance level, we will see STI heading towards 2960 level or even 3000 level before another significant retracement to happen.

What to watch out for this week:

1)      Breaking of 2920 resistance level.

2)      Testing of 2960 resistance level.

3)      Testing of 3000 resistance level.

Trading strategy to adapt right now:

-          Long traders can accumulate some long positions as long as the risk and reward remains good. Partial profit should be taken when resistance level is being tested.

-          Shortists should avoid shorting until the market has reached resistance level.

*Disclaimer:

This analysis 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.

Please consult your respective advisers.

STI gapped up yesterday morning in reaction to the positive closing of the DJI market. During the morning trading session, STI managed to break above 2920 resistance level and reached a high of 2925 level. However, STI failed sustain this breakout during the day and selling pressure starts to seep into the market again. Traders reacted negatively when the European market opened flat. This negative sentiment caused numerous counters to return their gains from the gap up opening. Thus, STI eventually ended 3.72pts lower. Last night, DJI tried to trade higher but it failed to do so and ended 11pts down. Will STI be able to break of the 2920 resistance level today? Or will STI retrace back to its consolidation’s lower range of 2880 level?

STI ended with a black candle after a strong gap up movement. This candle indicates that the market attempted to turn bullish but it failed to sustain it. It can also mean that STI is having trouble breaking its immediate resistance of 2920 and might need sometime in order to break it. The short-term indicators continued to show bearish momentum and this explains the reason why STI is unable to break 2920 resistance level. However, Stochastic is now out of the overbought zone and RSI is now only slightly above the overbought zone. This is a good indication that STI’s consolidation is about to complete. STI can be expected to continue to test its resistance level at 2920 level today.

The banks failed to trade higher yesterday after the strong attempt to break their recent high during the morning trading session. Both Uob & Ocbc faced strong resistance from the 200ma resistance level and were unable to test that level. DBS attempted to go for a higher high be ended up forming a bearish engulfing formation. As DBS is trading above 200ma, it might find support at 200ma line. The offshores were performing bearishly yesterday and created a drag for STI. Kepcorp continues to retrace further as it is still seeking for a support level to form a higher low formation. A good support level for Kepcorp lies at 10.30 level where 20ma also provide a confluence.

Most of the properties attempted to trade strongly higher yesterday as they had tested their respective support levels. However, they failed to maintain the bullishness and close lower than their strong opening before market closes. This sector could be the sector the contributed to the selling sentiment that happen before the market closes. Both Citydev & Capitaland formed long upper shadow yesterday which indicates that they have trouble breaking a resistance level. 200ma resistance were seen trending close to their upper shadow and this could imply that they were unable to break the 200ma line. Lastly, the commodities were the most bullish sector among all yesterday. Wilmar was the strongest as it managed to break its recent high and maintain its day as a long white candle. Indoagri had confirmed its bullish reversal pattern and it have formed a higher low formation. Hence, Indoagri is likely to head towards its recent high where 200ma resistance line is residing there too. If Indoagri is able to break this resistance level, it will seek the next resistance level of 1.55 or even 1.62 level.

In conclusion, STI will continue its struggle to break its resistance level at 2920 level. Numerous individual counters in different sectors are facing 200ma resistance line which they might have trouble breaking them. In order for STI to break out from its 200ma resistance, it will require the banking and offshore sector to be able to break for a higher high. Currently, the commodities will continue to sustain STI’s level while the rest of the sectors complete their retracement. Henceforth, STI is expected to continue to consolidate today and attempt to break 2920 resistance level. Selling pressure can be expected to happen before closing today as trades might avoid weekend risk.

Long traders make use of the retracement opportunity in various counters to execute a long position. Breakout strategy can still be adopted as long as it yields good risk reward. Shortists have to continue to start on the sidelines as the odds are not on the shorting side currently.

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.

STI failed to confirm the bearish reversal signal yesterday as bargain hunters start to flood into the market again. STI opened with a gap down but many made use of the lower price to start buying in which caused STI to 18pts higher and ended at 2906 level. This bullish action had helped STI to recover the losses it had made on Monday. Trading volume also started to pick up yesterday as traders start to speculate on penny stocks with potential takeover bids. Last night, DJI failed to trade higher after a strong opening and it ended up 20pts down. Will STI be able to go higher today after failing the bearish reversal yesterday? Or will STI continue to head downwards to find a proper support level?

STI ended with a long white candle which failed to confirm the bearish reversal pattern. It also closed near to the 200ma resistance line. This price action could mean that STI is still consolidating to form a higher high formation at 200ma resistance. Its short-term indicators continue to show bearish readings despite its strong bullish action yesterday. This is commonly seen when market is in the consolidation for higher high. RSI and Stochastic remain overbought and this could bring some selling pressure to STI. Henceforth, STI might continue to consolidate between the range of 2880 – 2920 for today, before a clearer direction could be seen.

The banks recovered from their losses yesterday as positive sentiments returned to the market. DBS was seen to be the strongest as it bounced off from the 200ma support for the past 2 days. Uob and Ocbc was seen be consolidating sideways for these few days. The offshore were trading bullishly yesterday as bargain hunters made used of the retracement to buy into them. Most of them attempted to break their recent high level. Sembmar successfully broke it recent high and it might head for a higher high formation going forward. The rest of the offshore might do a catching up if Sembmar continues to trade higher today.

The properties were less bullish yesterday as there were no strong reasons to buy. Citydev did not manage to take advantage of the bullish sentiment yesterday and retraced further towards its 100ma support level. Its 100ma support at 9.75 level can be a good support level for Citydev to form a higher low. Kepland and Capitaland continue to consolidate for a possible higher high formation. The commodities were trading mixed yesterday as some of them managed to trade higher. Sakari and Olam were trading bullishly yesterday as they bounced off from their support level. Olam held well at 200ma support level and could form a higher low formation here. Indoagri and Noble grp were also consolidating at their support levels and might be ready to rebound.

In conclusion, STI will continue to consolidate for this few days. Consolidation range is expected to be between 2880 – 2920 levels before it can continue its upside movement. Sectors that will provide bullish strength for STI to break out of this range are the Banks, Offshores and Commodities. Breaking out of this range is not expected to happen today as there is still underlying bearish momentum from the indicators. Market might continue to switch their focus on penny stocks for today as the bigger caps are in consolidation mode.

Long traders can enter long positions as long as there is confirmation of the support levels holding. Tight stop loss level should be established as the retracement might not have ended. Shortist should avoid shorting and close their short position as the downside room is getting limited.

STI ended its bullish streak yesterday as traders were tuned to take profit off the market. STI opened with a gap down for the start of the week and failed to sustain its bullish run. Sellers started to flood the market to protect their profit and buyers were getting cautious. Concerns of the Europe market starts to loom the market again as traders start turn their focus back to the European market. Weak opening of European market caused STI to fall before market closing. Hence, STI ended 27 pts down at 2888 level, slightly lower than 2890 support level. Last night, DJI opened red but it managed to recover most of its losses and ended up with a mere 6 points down. Will DJI’s intraday recovery bring some bullish confidence to STI today or will the selling pressure continue today?

STI closed with a bearish reversal pattern called one black crow pattern. This bearish reversal pattern coincides with the 200ma resistance line which might indicate that STI could have been facing 200ma resistance. The short-term indicators were also showing bearish signals in both Histogram and Stochastic. This will likely bring more bearish momentum to STI so that STI can have a retracement towards its support level to form a higher low formation. Its immediate support at 2890 level could have been broken and STI might head towards the next support level of 2850. As indicated yesterday, STI’s stronger support level would be at 2790 level.

The banks traded slightly lower yesterday as participants were unsure of whether the banks will be affected by the current European situations. Bearish reversal patterns were seen forming yesterday and if it experiences confirmation today, the banks will be more likely to head lower for the next few days. The offshores which has been experience strong rally for the past few weeks came to a halt yesterday. Sembmar got the biggest hit as it has been rising sharply. Its higher high formation has been formed and is likely to head towards its support level to form a higher low. Sembmar’s strong support level is now at around 4.61 level.

The properties also came to a pause yesterday as concerns of their earnings starts to weight this sector. Citydev is facing resistance from the 200ma line and is unable to break it during the past few trading sessions. Its current price action could be a possible flag or pennant formation with its breakout point at 10.16 level. F&N was the only bullish one as it hefty dividend payout attracted investors to take a look at it. F&N continues to head higher and hit a historical high of 6.93 level before closing at 6.89. It went ex-dividend after market closes yesterday and we will likely to see some selling pressure for it today. The commodities retraced strongly yesterday as profit takers sets into this sector. Olam and Sakari retraced strongly and they have dropped significantly after they have hit a high. Support levels for both of them should be watched as a higher low could be formed there. Noble grp also has a good chance of forming higher low as it is now heading towards its support level.

In conclusion, STI is likely to retrace in the upcoming days as bearish signals has been seen. STI’s immediate support level is at 2850 level but a better support stands at 2790 level. This retracement is likely to be a healthy one and STI’s uptrend should be sustainable. Most of the sector should experience retracement for this few days as many have yet to test their support levels. The commodities’ deep retracements have made them a good sector to look out for long positions as they are getting closer to their support levels. Opportunities for the long side will start to appear for the next few days as long as support levels are holding well.

Long traders can now start identifying all the possible support levels that various counters will hold. Long entry can be made once there is appearance of bullish reversal candles. Shortist on the other hand should start to watch out for opportunities to take profit if short positions have been made. Adding short position right now is definitely not a wise move.

Despite positive news from the European side, some market watchers are still sceptical of this market rally citing that STI is overbought. Furthermore, STI has surged higher for 4 consecutive weeks and there is real risk of a market retracement. As January draws to a close on Monday, will February be a bullish month also?
Let’s see what STI’s chart is telling us.

Trend: Uptrend, 20ma up, MacD above 0

Support: 2890 (200ma), 2850, 2790

Resistance: 2920, 2960, 3000

Observations:

Candlestick – Long white candle.

Histogram – 4Gs. No bearish divergence seen.

RSI – Around 77%. Overbought for 1 week. No bearish divergence seen.

Stochastic – Around 93%. Overbought. Possible bearish crossover forming.

Bollinger Band – Slightly out of upper band. Band continues to open up.

Conclusion:

Last week, STI managed to break its immediate resistance level of 2850 by gapping up. This could be due to the 2 days holiday break where STI attempts to catch up with the rest of the world’s market. 2890 resistance seems to be preventing the market to head higher last Wednesday.  However, STI managed to gap above that resistance level again and started to struggle at the 200ma resistance line. Last Friday was the key for STI’s long term trend. STI managed to break 200ma resistance after Greece announced that they were able to solve their debt problem. Market participants started to flood into the market again and thus, pushing STI to close above 200ma but below its immediate resistance level of 2920 level.

The mid-term indicators were showing that STI’s uptrend going to continue its upside movement for the upcoming mid-term periods. There are still no signs of weakness in the mid-term uptrend as there is no bearish divergence being seen. The short-term indicators continue to show bullish strength despite it being overbought for a long period. Stochastic is starting to show some weakness as a possible bearish crossover could be triggered.

As STI managed to break its key resistance level of 2890 last week, it implies that STI’s weekly chart have now changed its trend to either sideways or uptrend. Breaking of 200ma level increased the odds of STI changing its weekly trend to an uptrend one. In order for STI to confirm its weekly chart to be uptrend, a higher low has to be formed. The last 2 resistance level of STI failed to help STI to form its higher high formation. Hence, the next possible resistance level for STI will be at 2920 level. STI has to form a higher high formation before it can form a higher low formation. Hence, the odds of retracement to happen for STI are getting much higher right now.

If STI starts to form a bearish reversal formation at 2920 level, it will likely to retracement towards its immediate support level of 2890. However, this retracement might be deemed to be too shallow and STI is more likely to go for a deeper retracement after such a strong rally. Hence, STI might have a good chance to head towards 2790 level where the rising 20ma line might confluence with it. If this scenario fails to happen, it would mean that STI’s bullishness is still very strong and it is likely to head even higher. The next 2 possible levels for STI to form higher high formation would be at 2960 and 3000 levels. With the readings of the indicators, STI has higher possibility of retracement then surging higher.

In conclusion, STI’s bullishness is expected to come to an end for this week. The indicators have been indicating its overbought situation and a healthy retracement is now more likely to happen. Current resistance level of STI stands at 2920 level and STI might form a lower high here. What is lacking right now is a bearish reversal pattern to form before one can conclude that retracement is happening. Immediate support of STI now stands at 2890 level but a much better support level is at 2790 level. Henceforth, do expect STI to start retracing before it can hit for a higher level.

What to watch out for this week:

1)      Testing of 2920 resistance level

2)      Testing of 2890 support level

3)      Retracement to 2790 support level

Trading strategy to adapt right now:

-          Long traders should have taken some profit out of the market and wait for a good support level to long

-          Shortists enter countertrend short position when there are bearish confirmations for retracements. Shorting targets must be close to avoid sudden reversal of sentiment. Stop loss level must be tight as the trend is uptrend currently.

*Disclaimer:

This analysis 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.

Please consult your respective advisers.

Regardless of whatever reason people cited, STI indeed has surged strongly for the past 3 weeks and many were wary of buying at current high levels. On the other hand, many were also fearful of missing the opportunity as prices could still be on the low level despite such strong movements. Hence, the key question is whether it will still be worth to enter the market right now.
The charts should give us directions on what to do.

Trend: Uptrend, 20ma up, MacD above 0

Support: 2790, 2740 (20, 50 & 100ma), 2680

Resistance: 2850, 2890 (200ma), 2920

Observations:

Candlestick – Long white candle.

Histogram – 1G after 2Rs. No bearish divergence seen.

RSI – Around 72%. Overbought. No bearish divergence seen.

Stochastic – Around 90%. Overbought.

Bollinger Band – Slightly out of upper band. Band continues to open up.

Conclusion:

STI did a quick retracement last Monday and bounces off before even testing 2740 support level. This can be seen as a short term higher low formation for STI. Breaking of 2790 resistance level also confirmed that STI’s uptrend will be sustainable as a higher high will be formed. Hence, it resulted in STI heading towards 2850 level to test its next resistance level on Friday. Breaking of 2790 is significant because STI broke out of a significant lower high formation that was form on early Dec period. Hence, it is a strong confirmation of STI’s trend changing to uptrend and therefore, it will be deemed to be sustainable. However, due to current strong movement for the past weeks, there isn’t any significant retracement happening in the market. Hence, there is still a risk of STI to encounter a deeper retracement before it is able to head higher.

The mid-term indicators continues to show uptrend indication as 20ma is obviously trending upwards while MacD is obviously above 0. The short-term indicators were still showing bullish strength while they continue to trade in oversold positions. RSI and Stochastic has been weaving in and out of the oversold region for the past few weeks. This kind of movement is a mark of a strong bull and can remain in this manner for a long period. Despite bullish readings from the indicators, the fact with the market right now is that it is still overbought. Therefore, it will still be running a risk of a retracement if resistance levels are unable to break.

STI went against the odds and failed to form a higher high formation at 2790 resistance. Therefore, it might be forming its higher high at another resistance level instead. STI’s current immediate resistance now stands at around 2850 levels, which STI closes near to this resistance level. Currently, Friday’s candle pattern did not show that STI is having trouble breaking this resistance. Furthermore, strong trading volume might also be an indication of strength that might help STI to trade higher. Hence, there is a good possibility that STI might also break 2850 resistance level and head for the next resistance level of 2890. In order to know which level that STI will likely form a higher high formation, we need to wait for a bearish reversal formation to form at either of the resistance levels.

If STI did not manage to break 2850 resistance level after the CNY holidays, it will likely to start a retracement movement towards its support levels. Currently, STI’s support level is at 2790 level as the resistance has now turned into support. However, a stronger support level now stands at 2740 level as it has multiple confluences with 20, 50 & 100ma lines. This will be a good level for STI to form a higher low formation in order for it to continue its uptrend movements.

In conclusion, STI’s uptrend is expected to continue after the CNY holidays. Currently, one can expect 2 possibilities that are going to happen after CNY holidays. First, STI managed to break its immediate resistance at 2850 level and it will head towards 2890 to test it. 2890 will be a good level for higher high formation as it confluences with the 200ma resistance line. Secondly, if STI failed to break 2850 resistance, it will likely to retrace towards 2790 support level and test it. In the worst case scenario, if the retracement is strong, 2740 support level will most likely hold the market well.

What to watch out for this week:

1)      Breaking of 2850 resistance level

2)      Testing of 2890 resistance level

3)      Retracement to 2790 support level

Trading strategy to adapt right now:

-          Long traders should continue to look for opportunities to take some profits off the market in order to avoid sudden retracement happening.

-          Shortists can continue to look out for countertrend opportunities as long as off good risk reward. Stay sidelines for Shortists can also be a good strategy as this market is encountering a strong bull.

*Disclaimer:

This analysis 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.

Please consult your respective advisers.

STI inched higher yesterday as it the market sentiment remains bullish despite a possible reversal during the previous day. STI opened with a gap up which recovered much of the losses made during the previous day. The trading action was relatively flat throughout the day as traders were getting more cautious of its upcoming directions. STI ended 15pts higher with heavy volume traded. Last night, DJI closed 45pts higher. Will STI be able to continue its upside movement towards 2840 resistance level today? Or will selling sentiment starts to set in as traders brace themselves for a long CNY holiday?

STI closed with a doji like pattern yesterday. This candle pattern indicates that the market is indecisive of its directions and is treading cautiously. The bearish reversal pattern failed to confirm yesterday as STI did not drop lower yesterday. However, chances of retracement are still high as STI is getting closer to the resistance level of 2840. Stochastic still remains in the overbought region while RSI is starting to climb back into overbought. Upside is getting limited. Hence, the resistance level at 2840 is very likely to hold and resist STI from going higher.

The banks, with exception of Ocbc, managed to trade higher. Both Uob and DBS continued to attempt to test its immediate resistance level but failed to break it and ended with doji like formation. Ocbc on the other hand suffered selling pressure as concerns of the step down of the CEO might affect Ocbc’s future earnings. Ocbc still remains healthy above 20ma despite the selling pressure. The offshores were trading mixed yesterday and are starting to experience fatigue in climbing higher. Kepcorp reversed its earnings and started retracing slightly yesterday. Sembmar failed to trade higher but got supported by the 200ma line. The offshores closed with black candles and this could be an indication that they might be retracing soon.

The properties were enjoying some bullish strength yesterday. The market might have rotated to properties sectors to push its prices up. Capitaland and Kepland were the main beneficial of the bullish strength. Capitaland managed to break its 50 & 100ma resistance line and it reached the gap resistance level that was formed when the government announced the property curb. Kepland similar enjoyed huge trading interest yesterday and it managed to test its 100ma yesterday. Citydev might be the next target to enjoy such bullish run. The commodities were trading mixed yesterday as traders were selective. Noble grp, Olam and Sakari continues to enjoy bullish movement yesterday. Olam continues its strong bullish streak for 4 days and it managed to test 200ma line yesterday. Its upside might be limited by the 200ma line. Sakari managed to break its 100ma line yesterday and will be testing its gap resistance between 2.25 – 2.28 levels soon.

In conclusion, STI’s upside is indeed getting more and more limited. Sectors that have contributed to STI’s surge are now nearing their individual resistance levels. Their candle formations are also starting to show fatigue in bullish strength. In order for STI to hit 2840 resistance level, properties sector and commodities sector are the 2 remaining sectors that can aid STI to reach that level. Banks and Offshores are now in the risk of dragging STI lower or maintain STI at its current level. Rotational plays are starting to be seen in the market and mid cap can be expected to move in the coming weeks. As for today, STI will still continue to head higher but selling might set in as traders might close their positions before the CNY holidays.

Long traders can only adopt breakout strategy to enter long position currently. However, due to the limited upside for the market, risk and reward might not be favourable right now and hence, waiting for a retracement to go long will be a better strategy. Shortists have to set aside to wait for proper bearish sign before entering short position. Risk-takers might want to target short positions on offshore sectors as they are showing signs of weakness. Stop loss level for short positions must be very tight right now and it comes with lower probability of success.

STI attempted to trade higher yesterday but eventually it failed to maintain its bullishness and closer lower. STI opened lower as profit takers swarm the morning session. However, bullish traders start to push the price higher as HSI had a positive trading session. This caused STI to hit as high as 2824 level. But STI failed to maintain the strength and starts to retrace deeper after lunch. Profit takers start to come into the market again despite HSI positive closing and Europe’s positive opening. STI eventually ended at 2795 level. Last night, DJI managed to continue its bullish streak by closing 96pts higher as Euro concerns starts to ease again. Will STI be able to continue its surge towards 2840 level again despite yesterday’s weakness? Or will this time be the start of the retracement?

STI ended with a short black candle with upper shadow. This candle can be seen as either a black shooting star or a bearish harami formation. This candle formation indicates that this could be a possible reversal point for a retracement to happen. Short term indicators were also showing bearish readings as STI is due for a retracement. RSI and Stochastic had creep out of the overbought zone slightly. Despite these bearish readings, STI actually traded very closely to 2790 support level yesterday. With the current uptrend momentum, support level should hold well. Furthermore, STI did not test any resistance level yesterday and these bearish signs might have lower probabilities. Hence, STI’s 2790 support will be the key to determine whether STI will be going for a deeper retracement.

The banks failed to trade higher yesterday as their bullish streak came to a halt. Uob closed with a black shooting star pattern and is likely to retrace towards its 100ma line which is at 16.43 level currently. Ocbc retraced yesterday to test its 100ma resistance turn support line. Its 50ma will now be the key level to hold in order for its uptrend formation to continue to form. The offshores were trading mixed yesterday. Kepcorp was the strongest among the sector as it managed to close 4cts higher without bearish signs. Sembmar retraced the most yesterday as it retraced to test the 200ma line. Bearish signals are seen in its indicators and it might retrace to cover its gap support between 4.47 – 4.52 levels.

The properties traded slightly lower yesterday as profit taking sentiment starts to set in. The selling pressure was not as strong as the rest of the sectors as this sector climbed higher gradually over time. The 4 properties were still able to maintain above their 20ma lines and their uptrend will likely to continue as long as they hold well at 20ma. Most of the commodities retraced slightly yesterday. Olam was the exceptional one as it surged 2.1% higher. Olam managed to break the 100ma line and tested its recent high. A breakout of 2.42 level will indicated that Olam’s weekly chart would have turned into uptrend.

In conclusion, STI might have a chance to start its retracement currently. However, STI’s drop yesterday had caused it to trade near its immediate support level of 2790. With such a strong uptrend momentum, this support level is likely to hold. Furthermore, bearish signals did not form at its resistance level of 2840 level. Hence, yesterday’s retracement might just a movement to test out the breakout level of 2790. 2790 will now be the key level to determine whether STI would be going for a deeper retracement for the next few days. With positive closing from the DJI last night, STI might have a good chance to continue heading towards 2840 level.

Long traders can continue to ride their long position higher as long as trailing stops are not being breached. Adding long position right now might not yield attractive risk and reward, hence, patience is need to wait for the best opportunities. Shortist might have been attracted by yesterday’s movement to enter short position. However, 2790 support level will still hinder downside movement and thus, limiting the profits.