Daily Market Opinion for 19-Jul-2012

Daily Market Opinion for 19-Jul-2012
Daily Market Opinion for 19-Jul-2012

STI went against the regional markets’ movement again. The regional markets were showing bearishness but STI managed to end up slightly positive before closing. STI started with a gap up opening in reaction with DJI’s positive closing. However, STI did not maintain this bullishness and started to go on a free fall after HSI opened bearishly. The fall continued after the lunch break and hit as low as 3000 level before it rebounded. Positive Europe opening lifted STI up before closing. Hence, STI managed to avert the bearishness and close at 3017 level with 2.41pts higher for the day. Will STI continue to test 3030 resistance level? Or will STI start its retracement currently?


The price action of STI yesterday shows a classic black hanging man formation. This candle indicates that STI is starting to face resistance and might start to reverse if being confirmed. If STI trades lower than 3017 level today, it will confirm the reversal. The indicators were also showing signs of weakness in the current bullish momentum. Stochastic is starting to form a bullish crossover while the Histogram continues to show bearishness. With overbought condition seen in both RSI and Stochastic, STI will have higher chances of retracing. The immediate resistance at 3030 is yet to be tested and STI will likely be capped by this resistance level.


The banks were struggling to keep their heads up yesterday as they attempted to retrace yesterday. Uob was the only bank that closed lower yesterday and did not enjoy the last hour of surge yesterday. Its black candle indicates that it have failed to break the resistance and might be retracing back to its support level. Uob’s immediate support level stands at 19.40 level and it might be tested soon. Dbs and Ocbc both shows white hanging man formation as buying strength came back before market closes. Both of them were also showing signs of upside fatigue and might be retracing soon. Overall, the banks’ upsides are now looking weak and they might not be able to head higher anymore.


The properties were trading mixed again and the limelight continues shine on F&N. F&N did not head higher after ThaiBev announced that they are buying F&N’s stake. Profit-takers were seen flooding the counter as many were worried that ThaiBev might not offer a good price to purchase the stake from Ocbc and Great Eastern. F&N closed with a black candle which is a bearish reversal pattern. Despite the bearish movement yesterday, ThaiBev announced after market hours that they will be offering $8.88 per share for F&N’s stake. This might create a sudden surge for F&N to the offering price. Citydev was seen to be heading towards its resistance level of 11.80 yesterday. With its white candle closing, Citydev will have a good chance of testing its 11.80 resistance level today. Overall, the properties will still be buoyant up by F&N news.


The offshores were trading higher yesterday. Kepcorp is the strongest performer for this sector as speculation of its improved earnings is happening. Kepcorp will be announcing its earnings report today and it was believed to be having good results. Kepcorp’s immediate resistance now stands at 11.17 level after breaking its gap resistance level yesterday. Sembmar was the laggard in this sector as it continues to struggle at its support level. Support at 4.93 level is still holding but a series of black candle might indicate that the support have higher chances of failure. 4.93 level will be the key level for Sembmar to hold, or else, it will be heading towards its 20ma at 4.84 level. Overall, the offshore were seen to be showing bullish strength yesterday. Their bullish strength will likely to hold until they reach their strong resistance levels.


The commodities ended lower yesterday which dragged STI from advancing. Sakari suffered heavy selling yesterday after it failed to form a higher low at 1.34 level. Sakari tested its recent higher low support level of 1.30. Hence, its uptrend formation failed to form and it might be starting a sideways or downtrend movement. Noble grp also failed to hold at its support level of 1.09 level yesterday. This indicates a downside movement towards its next support of 1.06 level. It could be forming a downtrend movement currently as it breaks its sideways support level. Overall, the commodities were losing its bullish momentum and they are more likely to move in the bearish direction currently.


In conclusion, STI’s persistence of not to drop yesterday can be deem as bullish but this bullishness is starting to weaken. There is still chance for STI to test 3030 resistance level but chances of breaking it is low now. Numerous sectors are nearing its resistance levels and were also showing signs of upside fatigue. The main downside drag will come from the commodities sector as some of them failed to hold at their support levels. The only sector that might provide upside strength to STI will be the properties sector. Therefore, STI might be preparing itself for higher high formation and chances of retracement to happen are now greatly increased.


Long traders should avoid going on the long side as the bullish momentum is weakening. Taking profits on the long positions should be greatly encouraged. Shortist should continue to prevent for counter-trend short positions.


*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)