Daily Market Opinion for 22-Jun-2012

Daily Market Opinion for 22-Jun-2012
Daily Market Opinion for 22-Jun-2012

STI failed to head higher yesterday and started to retrace. STI reacted to DJI’s bearish closing the previous night and opened lower. Selling pressure continues throughout the day with little chance of rebounding. The selling pressure primarily came from profit takers whom had enjoyed the bullish movement for the past few days. Buyers were seen to be cautious and stayed out of the market yesterday. Weak European market open also escalated the selling pressure before market closing time. STI eventually ended at 2830 level with 25.53pts lower yesterday. This is the first drop after 4 days of rise. Last night, DJI retreated further by 250.82pts last night. Will STI’s support level at 2830 hold today? Or will STI seek the next support level?                                                                                                                                                                                                  

STI ended with a black candle that close lowers than previous day’s low. As stated yesterday, if STI closes lower than the previous day’s low, it will trigger a bearish reversal and retracement movement will be initiated. The short-term indicators were also seen to be forming bearish signals and this will likely push STI for a deeper retracement. Currently, STI is testing its 200ma support level at 2830; it is likely to break this support as there is strong bearish indication. STI might retrace further to test its gap support between 2814 – 2821 levels and could even reach out for a stronger support level at 2800. 2800 would be a better level for STI to form a support because it is the first breakout level to form this current uptrend.                                                                                                                                                                                                                     

The banks ended lower yesterday which ended their bullish streak. Uob exhibited the worse drop within the sector yesterday by closing 2.2% lower yesterday. It closed with a gravestone doji which implies that its intraday action has closed the gap and attempted to stay higher. But it still triggered bearish signal and is likely to head lower towards its support of around 17.80 – 18.00 level. Dbs was trading firmly yesterday as it managed to close merely 0.1% lower. However, it had formed a bearish candle call hanging man and if it closes lower than 13.65 level today, it will have confirmed its bearish reversal. If this is to happen, Dbs might retrace to the support of around 13.35 level. Overall, the banks seem to be set for retracement and this movement can drag STI lower today.

The properties ended lower yesterday and most of them triggered bearish signal. F&N dropped deeply yesterday which confirmed the previous day’s bearish reversal pattern. This will imply that F&N will be head towards its support between 6.68 - 6.72 levels. Citydev is also running a risk of a deep retracement. Its 100ma support line at 10.54 level is an important level to hold. If it fails to hold, it will imply that the retracement can reach as deep as 10.14 level. Henceforth, the properties were also expected to be retracing today and their retracement could be a deep one.                                                                                                                                                                                                  

The offshores were generally firm yesterday as they did not show strong bearish movements. Kepcorp ended lower and it had confirmed its bearish reversal signal yesterday. It closed at its horizontal support at 10.18 and if it fails to hold, it would mean that it is heading towards is 20ma support line. Its 20ma support line is now trading at 10.03 level. Sembmar had failed to break its 50ma resistance line yesterday and formed a bearish reversal pattern. If Sembmar is to close lower than 4.62 level, it will indicate that Sembmar will be heading towards its 20ma at 4.45 level. Overall, the offshores are also set for retracement in the upcoming days.

The commodities also ended lower yesterday as they failed to sustain their bullish streak. Olam was the hot play yesterday as its news of its CFO resignation is being announced. This news has caused Olam to gap down strongly and close 5.4% down. Despite the news, some traders think that the drop was just a profit taking action after Olam failed to break 50ma resistance level. Olam’s support level is currently at around 1.83 level and there is a possibility of it testing 20ma support at 1.75 level. Sakari, which moves closely with Olam, also fell strongly yesterday. Sakari is now at its support level of 1.30 and there is a possibility of it to fall further to 1.20 level. Henceforth, the commodities are likely to fall further to test its support level today.

In conclusion, STI have confirmed its bearish reversal pattern and is likely to retrace further. Its current support level of 2830 might not be able to hold today due to the bearish signal from the indicators and DJI’s weak closing. This will imply that STI will be going for a deeper retracement to test either the gap support between 2814 – 2821 levels or a more expected support level at 2800. Most of the sectors are expected to retrace as a whole. The property sector might experience a much deeper retracement as their support level is significantly far away.

Long traders should stay sidelines but actively looking out for counters that is testing their support level to long. Shortist can watch the properties sector for good counter-trend short position as their retracement can be a deep one.

*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)