Daily Market Opinion for 4-Jul-2012

Daily Market Opinion for 4-Jul-2012
Daily Market Opinion for 4-Jul-2012

STI continued to surge strongly yesterday as market participants anticipated improvements in the European Crisis. STI opened flat as it reacted to the flat closing of DJI on the previous night. Strong bullish movement from HSI’s opening had opened the flood gate of buyers into the market. 2910 resistance level was broken easily by these bullish buyers which forces STI to reach towards the next resistance level of 2950. With such a bullish sentiment, STI managed to close at 2945 level, 34.74pts higher. Last night, DJI manage to climb 72.43pts higher. Can STI climb higher today? Will the retracement starts today?


STI closed with a long white candle without much shadows being formed. This is a very decisive candle which broke 2910 resistance level which confluences with 100ma line. Breaking of such strong resistance level indicates that the current bullish momentum is very strong and has increased the odds of sustaining its uptrend movement. Short-term indicators continue to show bullish momentum and were not showing signs of weakness yet. RSI and Stochastic continue to head higher in overbought region. Upside is definitely getting limit and hence, the immediate resistance at 2950 level might hinder STI’s advancement. This horizontal resistance level confluence with the gap resistance between 2950 – 2987 which is a big resistance range for STI to overcome. Hence, STI should be facing resistance at these levels which might cause STI to start off a retracement movement.


The banks continue to trade higher yesterday and even managed to break their resistance level. Uob was the strongest performer yesterday as it managed to trade 2% higher. It even managed to break its resistance level of 19.00 and is now likely to head for the next resistance of 19.30. Dbs also managed to break its 14.00 resistance level and this implies that it will be heading towards next resistance of 14.20 level. Ocbc also managed to stay above its resistance level and confirmed its recent high breakout. Hence, Ocbc might be testing its resistance at 9.00 level. Hence, the banks might still have some upside room today as they are heading towards their next resistance level to test it.


Most of the properties gained marginally yesterday. Capitaland was the star performer in this sector yesterday as it managed to break out of its strong resistance of 2.74 level. Such break out has allowed Capitaland to continue its uptrend movement and is very likely to reach for higher resistance levels. The current immediate resistance level of Capitaland is at 2.84 level and if it manage to go beyond this resistance, it can even reach as high as 2.92 level. The reset of the properties did not manage to break their immediate resistance level yesterday and continue to test their resistance level yesterday. Overall, the properties might continue to stay bullish but they might be resisted by their resistance level.


The offshores continued to their bullishness yesterday. Kepcorp was seen to be very bullish as it managed to break its strong resistance level at 10.80 level and closed above it. Hence, Kepcorp will be heading towards its next resistance level at 10.98 level and could probably form a higher high formation there. Sembcorp has managed to catch up with its peers by breaking its strong resistance level of 5.19. Hence, Sembcorp will be heading towards the next resistance of 5.40 level. Lastly, Sembmar was seen to be struggling to head higher yesterday. If it manages to break its immediate resistance at 4.96 level, it can head towards its next resistance at 5.07 level. Therefore, the offshores might still have upside room to move.


Most of the commodities were able to trade higher yesterday. Golden Agri was the star performer yesterday with 5.1% up. Golden agri had managed to break its strong resistance level at 0.69 level and this has helped Golden agri to head for the next resistance of 0.725 level. Indoagri was also seen to be very bullish yesterday as it managed to stay above its 100ma line and tried to test its immediate resistance at 1.48 – 1.52 levels. Olam is still facing resistance from its 50ma line and if it managed to break it, it will be heading to its recent high of 1.98 to test it. Overall, the commodities were still lagging behind the rest of the sectors. Catch up movement can be expected if they managed to break out from their resistance levels.


In conclusion, STI is very bullish indeed. Yesterday’s expectation of being resisted by 2910 level was wrong and this proves that the current market sentiment is very bullish. This bullishness was primary lead by the banks and offshores yesterday and they will likely to lead STI higher today. Properties and commodities were only selectively strong and they have the potential to catch up with the other 2 sectors. Hence, despite the indicators are showing overbought, there is still upside room for STI. Current resistance level for STI stands at 2950 and there is a good possibility for STI to close the whole gap resistance range between 2950 – 2987 before a significant retracement can happen.


Long traders should continue to take partial profits and avoid adding long positions. Shortist might start to prepare for counter-trend short opportunities by identifying bearish candle formations.


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