*Disclaimer: This material 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. If there are any questions, please contact me (Jay)

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.

*Disclaimer: This material 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. If there are any questions, please contact me (Jay)

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.