Daily Market Opinion for 3-Jul-2012

Daily Market Opinion for 3-Jul-2012
Daily Market Opinion for 3-Jul-2012

STI started the second half of the month with a bullish start. STI gapped up firming in reaction to DJI’s strong positive closing last Friday and EU’s plan for the debt-laden European countries. Buyers were seen pushing the price of STI to a higher level during the early trading sessions but profit-takers were seen coming into the market when STI reaches 2900 level. Profit-takers continues to dominate the market during the mid of the day which pushes STI as low as 2888 levels before it started to rebound again. The rebound point come when European market opens with a positive note that prompted STI to head towards 2900 level again. In the end, STI managed to close at 2910 level with 32.14pts up. Last night, DJI strangled to keep its bullishness and closed with 8.7pts lower. Will STI facing more profit-taking action today? Or will STI be breaking for a higher level today?

 

STI formed a white candle with lower shadow yesterday. This candle can be seen as a hanging man formation as it formed at 2910 resistance level. With 100ma resistance line hovering at 2919 level, STI might be having trouble to head higher as noted on yesterday’s weekly opinion. Currently, the short-term indicators were still showing bullish indication as the indicators are heading higher. RSI and Stochastic have just entered the overbought region currently and upside will start to get more limited. Stochastic is also starting to show weakness in the bullish momentum currently. Hence, as STI is trading at 2910 resistance level, STI will likely to continue to test this resistance level today but might not be able to break it as overbought indications are appearing.

 

The banks traded higher yesterday but they were unable to close with white candle. DBS and UOB both ended with a black hanging man formation which indicates that they were facing profit taking pressure yesterday. If these banks close lower than their yesterday’s low, they will likely to retrace towards their support level. Ocbc, too, faced resistance yesterday and was unable to break its resistance level. Overall, the banks might continue to test their resistance levels but they might not be able to break their resistance level soon as their candles were indicating weakness in the bullish momentum.

 

The properties also ended higher yesterday but they, too, ended with black candles. Their black candles were formed at resistance level which showed that they were facing trouble breaking their resistance levels. Capitaland was unable to break its recent high resistance of 2.75 level yesterday. Despite being supported by 20ma for numerous sessions, Capitaland is still facing problem forming an uptrend. Going forward, if it is still unable to break 2.75 level, Capitaland might retrace back to its 20ma line at 2.66 level. For the rest of the properties, their bullishness is starting to show signs of fatigue by forming bearish candles. Hence, the properties might be facing selling pressure today.

 

The offshores were one of the leading sectors yesterday. This mainly due to the rapid rise in oil prices recently. Both Kepcorp and Sembmar were very bullish yesterday as they ended with long white candles. Both of them even managed to break their 100ma resistance line within a day. They were bullish indeed and they will likely to continue their bullishness today but upside should be getting limited as they are close to their next resistance level. Sembcorp is currently lagging behind them in terms of pace of upside movement. Sembcorp is currently facing a very strong resistance level at around 5.19 level. Hence, its bullish attempt was capped by this strong resistance level. Overall, the offshores will likely to remain bullish today, but their bullishness will get more limited as their next strong resistance level is getting near.

 

The commodities were trading stronger yesterday and they were the main sector that aid STI to close at 2910 level yesterday. Their sudden surge in trading activity before closing had greatly help STI to rebound back towards 2900 level. Olam, Noble and Sakari were the stronger performers yesterday. Noble managed to go above its 20ma and even broke 50ma resistance yesterday. Noble should be heading towards its recent high of 1.17 level currently. Olam is now facing 50ma resistance level and it could continue to test this 50ma resistance today before it can head higher. 20ma at 1.80 level will help Olam to stay supported to continue its uptrend movement. Overall, the commodities are expected to continue to remain bullish today as they still have upside room before they reach their resistance levels.

 

In conclusion, STI experience broad-based upside yesterday but it is starting to experience some weaknesses. The banks and properties were unable to maintain their bullishness yesterday and might be facing risk of retracement. However, the offshores and commodities will likely to hold the fort for STI to stay around 2910 resistance level today. Therefore, STI might experience a mix of profit-takers and buyers today. This implies that STI might be trading between 2910 – 2919 level today. Hence, traders must be aware that the upside is indeed getting limited and chasing the upside might not be a viable strategy right now.

 

Long traders should look forward to taking partial profits instead of adding long positions. Shortist might start to prepare for counter-trend short opportunities by identifying bearish candle formations.

 

*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)