Daily Market Opinion for 6-Aug-2012

Daily Market Opinion for 6-Aug-2012
Daily Market Opinion for 6-Aug-2012

STI form a year high yesterday after positive reports from the US & European markets. STI started with a strong gap up in the opening and attempted to trade higher. STI reached as high as 3086 level before sellers attempted to profit take. 3080 resistance level seems to be a strong resistance level which prevents STI from going higher. Before the market closing, more sellers came flooding into the market which caused STI to close at 3071 level eventually. STI was up 20.49pts for the day. Last night, DJI managed to close 21.34pts higher. Can STI break 3080 resistance level today? Or will the profit taking cause a retracement today?

 

STI closed with a black candle with upper shadow yesterday. This black candle indicates that STI is facing problem breaking the resistance level at 3080 level. However, the gap up motion yesterday also created a gap support level between 3056 – 3069. The short-term indicators were still giving mixed signals as the Histogram is bullish while Stochastic says otherwise. Stochastic continues to stay at overbought region. Therefore, with resistance at 3080 level, STI might continue to test this resistance level or it can start retracing. Its retracement might have limited downside as the gap support between 3056 – 3069 might hold well as support.

 

The banks were able to close marginally higher yesterday which indicates its continuation of uptrend momentum. Uob and Dbs managed to break for a higher high yesterday but both closed with a black candle which made one wonder if the breakout is sustainable. If both of them are able to close above the break out level today, the uptrend movement will likely be sustainable. Ocbc is the only one that did not form a higher high. It will likely to head towards its recent high of 9.62 level in attempt to catch up with its counterparts. Overall, the uptrend movement for the banks will likely to continue but their indicators were showing obvious bearish divergence which might cap their upside movement.

 

The properties were bullish yesterday and F&N was in the limelight again. F&N confirmed its sale of its APB stake to Heineken. F&N gapped up strongly yesterday after 2 days of trading halt. This positive news brought F&N to as high as 8.55 level before closing at 8.22 level. The market was questioning if the sale of stake will be advantageous to F&N earnings in the future. Citydev attempted to test its recent high of 12.02 but was unable to reach it yesterday. Kepland also attempted to break its recent high of 3.48 level but it failed to reach the level yesterday. Overall, the properties were still bullish and might continue to attempt to test their recent high today.

 

The offshores ended up higher yesterday with Kepcorp leading the surge. Kepcorp broke for a new high yesterday which gives an upside target to 11.59 level. Its breakout of 11.29 level will now turn 11.29 level into a support level for Kepcorp’s uptrend. Despite closing higher, Sembcorp and Sembmar were still struggling to continue its uptrend yesterday. Both of them closed at their 20ma line and were unsure of whether to head higher. If Sembcorp is able to trade higher than 5.40, it will be heading towards its recent high of 5.50. As for Sembmar, if it trades higher than 4.94 level, it will likely to test its recent high of 5.05 level. Overall, the offshore were still retaining their uptrend strength.

 

The commodities were able to trade slightly higher yesterday. Sakari was in the limelight after 5 days streak of bullish closing. Sakari ended slight higher and close to its resistance level of 1.50 level. It will likely to test this resistance level today before a retracement can happen. Noble grp encountered a spike in trading volume yesterday after it gapped up strongly. It is now trading above the 20ma line and tested the 50ma resistance line yesterday. Its upper shadow formation hinted that it is facing trouble breaking this 50ma resistance line at 1.10 level. If Noble grp is unable to break this resistance level and starts to retrace, the chances of downtrend continuation will be high. The key level to determine downtrend continuation will be the 20ma line is now stands at 1.08 level. Overall, the commodities were still struggling to form uptrend as most of them were still in downtrend.

 

In conclusion, STI might be facing trouble breaking the immediate resistance at 3080 level. With various sectors showing fatigue on their upside, it will be a challenge for STI to break beyond 3080 level; unless the banks are able to confirm their breakout and head higher towards their immediate resistance level. The main draggers for STI current are the commodities sector as they are mostly trading in downtrend. Therefore, upside likely to be capped by 3080 resistance but downside will likely be limited also. With the support from the gap support level between 3056 – 3069 levels, any retracement should be limited for now.

 

Long traders should reduce or close their long positions at resistance levels. Adding new long positions might not turn out profitable at this point in time. Shortist can look out for downtrend stocks to initiate short positions at resistance levels.

 

*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)