Daily Market Opinion for 18-Jul-2012

Daily Market Opinion for 18-Jul-2012
Daily Market Opinion for 18-Jul-2012

STI refused to retrace yesterday despite weak DJI closing on the previous night. With a flat opening, STI climbed gradually after report of F&N’s stakeholders being offered to purchase their stake. F&N contributed most in pushing STI above 3000 level and towards 3030 level. Despite strong contribution from F&N, the rest of the markets were also showing strength as HSI climbed strongly which lifted up the bullish mood. STI hit as high as 3027 level before closing at 3014 level. STI ended with 16.05pts higher. Last night, DJI managed to close 78.33pts higher. Can STI continue to head higher today?

 

STI closed with a white candle with upper shadow yesterday. This candle failed the bearish candle on the previous and signals that STI is not ready for retracement yesterday. However, its upper shadow formation is giving hints that STI is nearing its resistance level at 3030. Short-term indicator continues to be showing mixed and overbought. The histogram still refuses to show bullish signal while the Stochastic continues to do so. Both RSI and Stochastic continues to be in overbought region and are not showing signs of retracing out of the zone. Therefore, STI might continue to head higher towards its resistance at 3030 level.

 

Most of the banks were trading higher yesterday as they tried to advance towards their resistance level. Uob had tested its resistance level at around 19.90 level and might be running a risk of retracement despite yesterday’s bullish movement. Ocbc broke its immediate resistance level and is now testing its gap resistance between 9.02 – 9.35 levels. Its upper shadow formation shows that it is facing resistance from this gap. Lastly, Dbs did not manage to head higher yesterday and instead, profit taking strength was being spotted. As is it already facing gap resistance, Dbs is facing trouble to trade higher yesterday. Overall, the banks had also contributed significantly to STI’s bullishness yesterday. However, they are now facing resistance and might be struggling to head higher.

 

F&N shined in the property sector yesterday while the rest were trading mixed. The buyer and buying price of the offerer to Ocbc & Great Eastern stake was unknown yesterday. Rumours were being speculated that Kirin will be buying Ocbc & Great Eastern stake on F&N. This caused strong upside speculation that the offer price is likely to be high as Kirin is one of the “richer” beverage company. However, this morning, ThaiBev announced that they have potential interest in the stake acquisition. This might potentially be something unexpected for the traders in the market. Apart from F&N, Citydev also gained strongly yesterday as it ignored the bearish candle on the previous day. Citydev is now nearing its resistance level around 11.60 level and might show signs of fatigue at this level. Overall, the properties sector should continue to stay mixed while F&N will continue to be heavily speculated.

 

The offshores were trading mixed yesterday as they have yet to gather steam to head higher. Kepcorp attempted to break its recent high of 10.93 level but it failed to break it. Eventually, it closed with a black shooting star. With its results announcement tomorrow, Kepcorp might face strong intraday volatility. Sembcorp failed to head higher yesterday and ended up with a black candle. Its shadows formed yesterday indicated indecisiveness and it could have tested a resistance level. Hence, Sembcorp might struggle to head higher currently. Sembmar is the laggard among the sector as it has yet to form a higher high. Sembmar is still struggling at its support level of 4.93 and yet to show strong signs of bullish reversal. Overall, the offshore will likely to be trading mixed as most of them are facing resistance.

 

Bullish strength was only selectively seen in the commodities. Golden agri was the strongest performer yesterday as it managed to break 2 resistance levels. With its bullish signal being triggered, it will be heading towards its next resistance of 0.77. Its new support level could be either at 0.72 or 0.74 levels. Wilmar also started to show some signs of life yesterday as it managed to rebound and stay above 20ma line. It is now facing 50ma resistance line at 3.70 level and if it breaks it, it will be heading back to its sideways resistance at 3.74 level. For the rest of the commodities, some bullishness was seen in them but they were lacking in strength. Most of them were close to their support level but they requires strong upside boost in order to start their uptrend movement.

 

In conclusion, despite strong showing by STI yesterday, it was mainly contributed by the banks and properties sectors. The banks and properties have now reached their resistance level and they might have trouble breaking it. In order for STI to reach 3030 level, the offshores and commodities sectors must start to show bullish strength. The offshores are mostly facing resistance and might not be contributing the upside but for the commodities, they are full of upside potential as most of them are closer to their support levels. Therefore, STI will likely to continue to experience mixed sentiment today while F&N will still be in the limelight.

 

Long traders have to be very selective in choosing long positions. Existing long positions should take strong consideration to take half profit when targets are met. Shortist should list out counters that are trading at resistance levels and plan for short position if there is any bearish reversal.

 

*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)