Daily Market Opinion for 5-Jul-2012

Daily Market Opinion for 5-Jul-2012
Daily Market Opinion for 5-Jul-2012

STI encountered muted trading activities yesterday as traders are treading cautiously. The opening session started with a slight gap up which managed to maintain its strength for the early morning session. However, when HSI opened weakly, STI started to slide back towards its previous day’s closing. Trading activities remain muted throughout the day with hints of profit-takers selling. European market also opened flat yesterday which did not have much impact on STI’s closing yesterday. Eventually, STI closed at 2948 level with merely 3.44pts higher. DJI was closed for its national day last night. Will this muted trading activity continue today? Or will STI start its retracement currently?  


A short black candle was formed in STI yesterday. This indicates that the bullish momentum for the past few days has halted yesterday despite a positive closing. This black candle indicates that STI is resisted by the 2950 resistance level. In the meantime, the short-term indicators were still showing bullish momentum but Stochastic is starting to show weakness in the bullishness. RSI and Stochastic continued to be treading in the overbought region. Hence, the resistance level at 2950 and the gap resistance between 2950 – 2987 levels will likely to continue to resist STI’s upside today.


The banks ended mixed yesterday despite their attempts to trade higher yesterday. Uob faces resistance from 19.30 level and was unable to break it yesterday. Instead, the resistance forced Uob to retrace and closed slightly lower than the previous day. Dbs also faces similar price action as it tested its resistance at 14.20 level and failed to break it. With its bearish indication from the Histogram, Dbs is likely to start its retracement for a higher low formation. Ocbc continued to struggle to trade higher yesterday and it managed to end flat. With its doji candle, it indicates that Ocbc is also facing resistance too. Henceforth, the banks are facing their resistance levels and are unable to break them. Chances of retracement to happen for the banks are much higher currently.


The properties were also trading mixed yesterday. Capitaland and F&N were both trading higher while Citydev and Kepland ended lower. F&N was the star performer for this sector yesterday as it managed break its historical high of 7.11 level and created a new historical high of 7.20 level. With no resistance level reference for F&N, F&N will likely to have more free room to surge higher. Based on fibo projection, F&N might face resistance around 7.30 level. Capitaland started to lose steam yesterday after it tested its resistance level at 2.86 level. With its black shooting star candle, it will likely to retrace towards its immediate support of 2.76 level. Overall, the properties are also facing resistance which they find trouble breaking it. Hence, they might start to perform retracement actions towards their support levels.


The offshores also ended up mixed yesterday. Kepcorp did attempted to trade higher but it is now facing resistance from its gap resistance between 10.90 – 10.98 levels. Its black candle formation yesterday might indicate a start of retracement going forward. Current support level for Kepcorp stands at 10.76 or the retracement could reach to as low as 10.46 level. Sembcorp, which had broken out its major resistance level of 5.18 level, failed to continue its breakout action yesterday. Traders were cautious and took profit which caused more selling action yesterday. This selling action pushed Sembcorp to close at 5.21 level. Its resistance turn support of 5.18 level will not be tested again. Overall, the offshores were also facing selling pressure which will likely to lead to a deeper retracement.


Most of the commodities lost their upside momentum yesterday as they closed lower. Indoagri has halted it’s ascend at 1.47 resistance level and formed a bearish dark cloud cover formation. With bearish indication from its indicators, Indoagri is very likely to retrace today. Retracement target for it will be either 1.42 support or 1.38 support levels. Golden agri also face similar bearish candle which might force a retracement to happen. If Golden agri fails to hold its support at 0.70 level, it will likely be retracing deeper towards next support of 0.685 level. Overall, it is very clear that the commodities are set for a retracement movement. Hence, selling pressure is expected to be seen in this sector.


In conclusion, the bullish momentum for STI will likely to come to a stop today. Upside strength has definitely weakened after yesterday’s price action. This is because most of the sectors have reached their resistance levels and their candles indicated that they have trouble breaking these resistance levels. With the resistance at 2950 level, any upside currently will be countered by profit-takers which will prevent STI from going higher. Therefore, retracement can be expected for the next few days with a downside target towards its immediate support level of 2910 level.


Long traders whom have taken partial profit should wait patiently till the desired support level to reach before buying back the positions. Shortist can adopt counter-trend strategy to initiate short positions once there is confirmation of the bearish candles.


*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)