Daily Market Opinion for 20-Jul-2012

Daily Market Opinion for 20-Jul-2012
Daily Market Opinion for 20-Jul-2012

STI continued to surge higher yesterday in reaction to DJI’s bullish closing on the previous night. This surge has led STI to test the resistance level of 3030 level. STI opened with a gap up at 3035 level and even attempted to go beyond its opening but it started to face selling pressure when it reaches 3039 level. Profit taking was seen during the day which caused STI to close the intraday gap. Buying sentiment was weak during the day but STI still managed to close at 3028 level; 11.75pts higher. Last night, DJI closed 34.66pts higher. Will STI be able to break this 3030 resistance level? Or will STI start to retrace at this level?

 

Yet again, STI formed a black candle yesterday but it failed to confirm the bearish hanging man pattern. This black candle had tested the resistance level at 3030 and failure to close above this resistance level indicates that 3030 is a strong resistance level. If STI is to trade and close lower than 3020 level today, it might trigger a bearish reversal movement. The short-term indicators were also showing bearishness and this will likely to create downside pressure to STI today. Hence, it is very likely that STI might start a retracement soon. The immediate support level for STI stands at between 2980 – 3000 level. This will be the likely level STI will hold if the retracement is confirmed.

 

Most of the banks were showing strong performance yesterday. Dbs surged with a gap up yesterday after reports that Indonesian government decides to ease the policy of foreign ownership on their local banks. Their previous proposed acquisition on Bank Danamon, which was stalled since April, might go through. This lifted DBS to close with $0.21 higher, closing at 14.55 level. Dbs will likely to test the next resistance at 14.68 level. Ocbc also received a boosted bullish performance yesterday. The offer of purchase of F&N & APB’s stake by ThaiBev will likely to benefit Ocbc. The profit from this sale, if being approved, is being speculated by traders that it will be paid out as a special dividend. This caused Ocbc to break its gap resistance and it will be heading to the next resistance of 9.56 level. Overall, the banks might still have a little upside room to go.

 

The properties were mostly trading higher yesterday. Kepland announced its earnings results and it turned out to be profitable. This boosted Kepland to break its weekly chart’s high of 3.42 and confirmed the continuation of the weekly uptrend movement. However, Kepland closed at its resistance level of 3.48 level and might start to face some selling pressure. F&N received a strong beating after ThaiBev announced the offer price of $8.88. Traders were disappointed that a price bid war might not be happening on F&N and ThaiBev has no intention to takeover the company. This resulted in strong profit taking sentiment which causes F&N to drop $0.36 for the day. This morning, Henineken, proposed to F&N to buy its APB’s entire stake at $50 each. This might spark another round of price bidding war on APB which F&N will stand to benefit from its substantial ownership of APB. Overall, the properties were showing bullish signs but they seem be weakening in strength.

 

The offshores strength yesterday as most of them continued their uptrend movement. Kepcorp opened with a strong gap up yesterday in anticipation of its strong earnings report. Its earnings reported a growth in its net profit which was resulted in its property unit gains. Kepcorp might be testing its next resistance at 11.36 level. Sembcorp also improved strongly yesterday after it has managed to break its previous resistance of 5.40 level. It will likely to head towards next resistance of 5.60 level. Overall, the offshores might have upside room to continue its bullishness.

 

The commodities were trading mixed but they were plagued with black candles. This signifies lack of bullish strength in this sector. Sakari managed to hold at its support level at 1.30 level but it is still lacking of momentum to rebound. Olam continues to trade sideways as it start to form triangle like formation which can break either way. Indoagri continues to hold above its support level of 1.44 but it is yet to find signs of continuing its uptrend movement. Lastly, Wilmar is still struggling on its upside as its 50ma line is still preventing it from going higher. Its 20ma line is still holding well at 3.60 level. Hence, it will likely to be trading within this 2 MA lines’ range. Overall, the commodities might still be plagued with bearish movements as they are lacking of catalyst to continue their uptrend movement.

 

In conclusion, STI has managed to test the major resistance of 3030 level yesterday. This major resistance of 3030 is likely to hold as the indicators are showing signs of bearishness. This will likely to lead to a retracement towards 2980 – 3000 level if the retracement is being confirmed. If STI is to trade below 3020 level today, the expectations of the retracement will likely to happen. Selling pressure might be seen in most of the sectors like the banks, properties and offshores as they have surged significantly recently. Given that today is Friday, more selling pressure might be triggered as traders might choose not to hold their positions over the weekend.

 

Long traders should have already taken partial profits or even close their long positions. Shortist can start hunting and even enter short positions if there are bearish reversal confirmations. Shortist should be adopting Counter-Trend strategy.

 

*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)