Daily Market Opinion for 7-Jun-2012

Daily Market Opinion for 7-Jun-2012
Daily Market Opinion for 7-Jun-2012

STI rebounded strongly yesterday and managed to break its gap resistance between 2715 – 2737 levels. The bullish strength was due to hopes on the European Central Bank (ECB) to introduce easing measures to calm the market. However, the ECB decided to keep the interest rate unchanged last night during their meeting. Yesterday’s opening started with a gap up and STI managed to gain strength gradually till it broke the upper resistance line of the gap resistance. Buyers were quick to enter the market after the resistance broke and it could also be pushed higher by European market’s bullish opening. Eventually, STI managed to close at 2760 level with 48.52pts higher for the day. Last night, DJI ended bullishly with 286.84pts higher despite ECB announced to keep the interest rate unchanged. Will STI be able to head higher today? Has STI reversed it trend?                                                                                                                                                                   


Breaking of the gap resistance level confirmed that STI had formed a lower low at 2698 level. This breakout is a convincing one as STI closed with a long white candle yesterday. This also indicates that STI is now heading towards its next resistance level of 2780 and could probably test this resistance level to form a lower high. Short-term indicators have reversed its bearish momentum to a bullish momentum as they triggered bullish signals. If STI manages to head higher today, it will confirm this bullish signal. Bullish divergence signal is also formed after yesterday’s movement and this could indicate that STI’s downtrend has weakened. Hence, in order for STI to turn uptrend currently, it must break its recent high at 2811 level before we can conclude a possible uptrend formation.


The banks ended positively yesterday as they were recover their gains they had lost yesterday. Dbs, with the strongest bullish strength on the previous day, managed to continue higher but it is showing signs of fatigue as it closed with a dragonfly doji. Uob managed to how its support very well and formed a bullish harami pattern at 200ma, hence a reversal might happen for Uob. The properties were showing strong bullish movement yesterday as some managed to break its 20ma resistance line. Capitaland and Citydev managed to break their 20ma line without hesitation yesterday. Their movement yesterday has increased their odds of reversing their downtrend formation till an uptrend one. Kepland & F&N were also close to their 20ma line and could probably mimic the other 2 properties to break this resistance line.


The offshores were also performing bullishly yesterday. Sembmar was able to hold well at its 200ma line and closed with a bullish reversal pattern. Coupled with bullish signal from its indicators, it should not have a problem to rebound towards its resistance at 4.38 level. Kepcorp also have similar readings and it could also rebound towards 10.00 level. The commodities were one of the main contributors of STI’s strong upside movement yesterday. Sakari, Olam and Indoagri rebounded sharply yesterday. Sakari managed to rebound above its 1.20 support level and proved that previous day’s movement is just a whipsaw. Indoagri and Olam’s sharp movement yesterday have created bullish divergence signal in their indicator, hence, their downtrend are weakening.


In conclusion, STI’s broad-based bullish movement yesterday has changed the strength of the downtrend movement. Numerous sectors formed bullish divergence signal and this clearly indicates that their downside is getting limited and a trend reversal might occur. However, we can’t confirm that STI’s downtrend has turned uptrend as there is no formation of higher low or higher high. In order for STI to turn uptrend, it must not only break its current resistance of 2780 level, it must also break its recent high of 2811 level before we can conclude that STI is turning uptrend. The odds of turning uptrend are definitely higher right now as long as the various sectors are able to continue their bullish movement.


Long trader can start to look for counter-trend opportunities as bullish divergence has formed. Shortist has to be wary of the weakening of downtrend and if needed, short positions have to be close prematurely before it has meet its target.


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