Daily Market Opinion for 25-Jul-2012

Daily Market Opinion for 25-Jul-2012
Daily Market Opinion for 25-Jul-2012

Yesterday, STI recovered part of the losses as market participants started to digest Spain’s debt issues and possibility of bailout. STI opened with a gap up yesterday morning as buyers entered the market hoping that the retracement has been done. Despite strong bullish actions in the 1st hour into the trading session, STI was trading flat for the morning session. Volatile starts to come into the market after lunch hours as speculations on the European situation started to destabilise the market sentiment. Eventually, STI managed to trade higher by 15.95pts and close at 2998 level. Last night, DJI closed 104.14pts lower. Has yesterday’s rebound prompted that STI had finished its retracement? Will it be a good time to enter long positions?


STI ended its day with a small white candle with longer upper shadow. This upper shadow indicates that STI is facing some resistance that prevented it from trading higher during the day. As identified yesterday, there is a small gap resistance between 3001 – 3005 levels which could be the culprit to prevent STI from going higher. Despite the bullish action, the indicators were still showing bearish momentum and the retracement movement might continue to persist. Hence, yesterday’s rebound could just be a gap covering action. However, if STI is able to rebound and close above yesterday’s high of 3007 with a white candle, it will confirm that STI has indeed ended its retracement and could continue its uptrend. Otherwise, STI might continue to head lower towards support level of 2950.


The banks were able to recover part of its losses yesterday. Bullish movement was clearly seen in Uob as its support level at 20ma managed to hold well. With bullish candle that is being formed yesterday, Uob might also perform a bullish crossover in Stochastic is it is able to close higher today. Dbs’ gap support level held strongly too. Dbs refused to head lower yesterday as the gap support between 14.35 – 14.47 levels prevented Dbs from dropping further. However, Dbs’ bearish divergence continues to be in effect as it have yet to break its recent high of 14.70 level. Overall, the banks seem to be holding firmly at their support level and are showing signs of rebounding to continue its uptrend. However, the presence of bearish divergence reading indicates possible trend reversal. Cautious trading will likely to be happening for them.


The properties were showing mixed trading sentiment yesterday. F&N’s saga with APB is still showing some bullish strength but F&N’s candle closing shows uncertainly in the bullish strength. Kepland, which broke 20ma, managed to recover back to 20ma line. Despite the recovery to be above 20ma line, it is still uncertain if Kepland will stay above 20ma and be supported by this 20ma line. Capitaland is also trading at 20ma support line and formed a bullish candle at this support level. If this support manages to hold, Capitaland might be heading back to its immediate resistance of 2.98 level. Citydev is the only one that show bearish movement yesterday. As Citydev’s immediate support level is at 11.38 level, Citydev might still have room to slide lower. Therefore, the properties are likely to be trading in their own direction today.


The offshores ended higher yesterday despite expectations of further downside movement. Kepcorp regained back all the losses it had incurred on the previous day while Sembcorp managed to hold at its support level. Sembcorp held well at is 20ma support level and it horizontal support level of 5.27 level. Slight bearish divergence was seen in its histogram but it did not conform to the RSI reading. Hence, Sembcorp will still have good uptrend continuation chances. Sembmar continued to struggle at 100ma support line and it is unclear whether this support level will hold as it ended with a black candle. Sembmar’s upside  could be capped by the 20ma line at 4.90 level. Overall, the offshores held well at their support levels and might have a good chance of rebounding further.


The commodities were trading mixed yesterday and were lacking of trading interest. Golden agri managed to hold very strongly at its 20ma line at 0.72 level and rebounded upon testing that support level. A bullish counterattack pattern was formed and if Golden agri trades higher than 0.73 level today, it will likely to head higher. However, Golden agri is showing clear bearish divergence on its histogram and this might limit the upside strength of Golden agri. Wilmar also managed to hold its support at 3.53 level without breaking it yesterday. Its sideways movement is still intact and could be testing its sideway resistance of 3.74 level. The rest of the commodities were not showing any decisive direction yesterday as they were lacking of trading interest.


In conclusion, the expectation of STI to retracement further yesterday might still be intact. Yesterday’s rebound could be a gap covering action of the gap resistance between 3001 – 3005 levels. With bullish strength from the banks and the offshores, there might be a chance for STI to go beyond this gap resistance. In order to confirm STI to be continuing its uptrend, it must trade higher than 3007 level. However, the appearance of bearish divergence and bearish movement in the commodities sector might drag STI down. If STI fails to break above this gap resistance levels, it will indicate that STI will continue to retrace towards its support level of 2950 level. Therefore, STI can go either ways today.


Long traders must be very selective in entering long position. Counters that are trading at 20ma and ends with bullish candle can be a trade for long position. However, cautious position is highly encouraged as there is bearish divergence. Shortist might have taken some profits when the price drops. Entering more short position now might not be a good move.


*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)