Daily Market Opinion for 24-Jul-2012

Daily Market Opinion for 24-Jul-2012
Daily Market Opinion for 24-Jul-2012

STI started the week with a deep retracement as STI reacted to the news on Spain’s need for a full bailtout for its state. This caused STI to open with a gap down yesterday and the immediate support of 3000 level was broken almost immediately. Attempts to rebound during the day were unfruitful as 3000 level might have turned into a resistance level. Trading activity started to lighten before lunch hours but after lunch, more selling pressure starts to pile up again. The further pressure was created by weak European market opening but short covering was seen before market close. Eventually, STI closed at 2982 level with 33.24pts lower for the day. Last night DJI closed lower with 101.11pts down in react to Spain’s bailout fears. Will STI drop further? How low can STI go?


STI closed with a long black candle that gapped down yesterday. A small gap resistance between 3001 – 3005 levels was created but this resistance can be negligible. Lower shadow formation showed some reluctance to drop further as STI starts to approach the stronger support level at 2950. Short-term indicators continue to show bearish indication and the downward momentum will likely to continue today. Macd formed a crossover which indicates increase in risk trend reversal. As identified yesterday, 2950 is a key support level to determine whether STI will still have chance to continue its uptrend movement. Henceforth, STI is now really close to this key support level and it is important to watch if this support level is broken or not.


The banks suffered strong profit taking selling pressure yesterday. Dbs & Ocbc suffered the strongest selling pressure yesterday as they did not retrace last week. The banks were plagued with concerns on the current economic situations again and traders decided to lock in their profits. Uob was the only bank that had already started its retracement last week. Uod is now at its 20ma support level and if it breaks it, it might have good chance of reversing to downtrend. The key level to determine if Uob is forming downtrend will be 18.89 level. Breaking this key level will indicate further downside for Uob. Hence, Further selling pressure can be expected for the banks today.


The properties also suffered very strong selling pressure today which halted their current ascends. Kepland suffered the strongest profit taking pressure yesterday as it has not been retracing for a long period of time. It might be heading towards its support level of 3.20. Citydev also failed to head higher and is now retracing towards its support of 11.40 level. Capitaland also retraced despite its inability to head higher last week. Capitaland is now testing its 20ma line and if it fails to hold at this level, its uptrend movement might be threatened. Lastly, F&N opened with a gap up today after its trading halt last week. Due to market’s bearish sentiment, F&N failed to trade above 8.00 level despite the good news announced. Overall, the properties were now in danger of trend reversal if they fail to hold their current support level.


The offshores suffered selling pressure yesterday as they were unable to break their immediate resistance levels. Both Kepcorp and Sembcorp confirmed their bearish retracement as they failed to form higher high. Sembcorp’s retracement has immediately brought it back to the 20ma support level and it must hold at this support level or else it will be in danger of turning downtrend. Sembmar broke its 20ma support level and close at 100ma line. It is now uncertain if it is able to maintain its bullish momentum as MacD and RSI is showing bearish mid-term signs. Overall, the offshores are mostly trading in a danger zone of turning its current bullish trend to bearish one.


The commodities continued to trade bearishly this week as they failed to continue their bullish momentum. Noble grp suffered very strong selling as it failed to hold its support at 1.09 level last week. It might have broken its weekly low of 1.05 level and this will indicate the continuation of mid-term downtrend towards its immediate support of 1.02 level. Olam and Indoagri also suffered very strong selling pressure yesterday and they both broke their support level. Olam has broken down from its symmetrical triangle like formation and this will break it down further to the next support level of 1.69. Indoagri might be heading much lower to test its gap support level of 1.355 – 1.375 levels. Overall,  the commodities will continue to weaken till clear signs of support is being formed.


In conclusion, STI is set to head lower today as it has yet to reach its key support level of 2950. Selling pressure is expected to be seen in all the sectors as most of them have yet to show signs of support from their support levels. Numerous bearish divergence signals were spotted from the Histogram. Therefore, STI’s current uptrend momentum has definitely been weakened and it is very important for STI to hold at 2950 support level. STI is expected to be testing 2950 support level today or tomorrow before chances of rebound can be seen.


Long traders should wait for the market to test its support level before looking at the long side. Shortist whom has initiated some counter-trend short positions last week should look forward to take some profits.


*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)