Daily Market Opinion for 15-Aug-2012

Daily Market Opinion for 15-Aug-2012
Daily Market Opinion for 15-Aug-2012

STI continued its bullish streak yesterday after speculations of recovery of the different economies. STI started with a lacklustre opening as it open slightly higher. Trading activity was slow during the early session as participants of the market were looking for directions. After lunch hours, buying momentum started to pick up again as HSI took the lead in the bullishness. Positive Europe market opening propelled the price higher as STI test the immediate resistance level at 3080. Buying activity was strongly support by the increase in trading volume. Eventually, STI closed at 3087 level with 23.03pts higher. Last night, DJI did not manage to recover the previous day’s losses and ended up flat, 2.71pts higher. Will STI be able to continue its bullish momentum as it could have broken 3080 resistance level? Or will the bearish divergence signal take effect and cause the resistance level to hold?


STI formed a long white candle yesterday. This candle signifies a continuation of the bullishness after confirmation of the bullish reversal formation. With the closing above the recent high of 3086 level, there is a good possibility that STI have managed to break the resistance level and heading for a higher high formation. However, the breakout was merely 1pt higher than the recent high. Therefore, there is a possibility of whipsaw. The short-term indicators were triggering bullish signals after yesterday’s bullish movement. This implies that STI might continue this bullishness and its breakout might be sustainable. Both RSI and Stochastic are now in oversold zone and the next resistance at 3130 level is expected to hold as resistance. Henceforth, if STI is able to stay above 3080 level today, it will likely head towards 3130 level to test it as resistance.


The banks traded higher yesterday which helped STI to attain its positive grounds. Uob was seen to be the strongest as it started off with a strong gap up motion. Its gap up also allows it to break its recent high of 20.15 and it could be heading towards the next resistance of 20.28 level. Any immediate retracement could be supported by the gap support between 20.00 – 20.11 levels. Dbs also enjoyed bullishness yesterday as it managed to test its recent high at 14.99 level. Ocbc continued to struggle as it is now facing resistance from its gap resistance between 9.41 – 9.45 levels. Overall, the banks might still have upside strength to surge.


The properties were trading mixed yesterday. Capitaland managed to hold well at its 20ma support level and ended up with a bullish reversal candle. If it is able to trade higher today, it will confirm the bullish reversal with an immediate target towards its recent high of 3.14. Kepland managed to break its recent high slightly but its traded volume is not significant enough to call for a proper breakout. Kepland must stay above 3.47 level for the next few days before it can have good chances of test the immediate resistance of 3.57 level. Citydev suffered strong drop yesterday after failure to break the resistance at 12.00 level. Citydev also announced its earnings report yesterday evening. The earnings turns out to be declining and this will likely to have bearish impact on Citydev today. Overall, the properties will likely to continue to trade in a mixed direction.


The offshores were one of the main bullish contributors to STI. Sembcorp was seen to be very bullish during the early trade but profit takers entered the market to prevent it’s ascend. This created a long upper shadow for Sembcorp which signifies that it is close to a resistance level. Chances of retracement are likely current and if Sembcorp closes lower than 5.68 level today, it will be retracing towards its support at 5.50 level. Sembmar also followed the bullish from Sembcorp but it managed to sustain its bullishness to closing. It is now testing its immediate resistance at 5.20 level. Kepcorp is still slowly climbing higher but it is lacking of bullish conviction. Overall, the offshores are nearing their resistance level and profit taking actions might start to take place.


The commodities were very bullish yesterday after Noble grp announced an increase in earnings. Noble grp enjoyed a strong surge after its earnings report shows a substantial gain. This enables Noble grp to break 2 levels of resistance and quickly bring it back to have a good potential of uptrend formation. Its support level is now around 1.235 or if the bullishness fails to sustain, the next support will be 1.175 level. Interestingly, Olam also follow Noble grp’s surge and tested its immediate resistance of 2.13 level. Wilmar managed to gain in strength and test 20ma resistance level yesterday. Last evening, Wilmar announced a drop in 70% of earnings in its 1st half of report. This will likely to bring bearish impact on Wilmar today. Overall, the commodities’ bullishness has hit resistance. Hence, there might be a possibility of retracement to happen for most of them.


In conclusion, STI’s current bullish sentiment seems to be sustainable and will likely to surge further. However, a few sectors might hinder STI’s surge for today. The properties and commodities, especially Citydev & Wilmar, will likely to be the main drag for STI. Furthermore, as the banks and offshores are quite close to their resistance levels, any start of retracement in these sectors will lead to retracement in STI too. Therefore, upside strength is expected to be weakening today with possibilities of a start of retracement despite bullish signals in the indicators. Traders have to be selective in their positions and best to avoid current uncertain situation.


Long traders can selectively look out for counters that are uptrend and trading at support level. Shortist should watch for bearish reversal at resistance level to prepare for a counter-trend short position.


*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)