Asian stocks (represented by the MSCI Asia Pacific Index) have logged their longest winning streak since 2005 amid a backdrop of improving manufacturing reports in China, Europe, India and U.S.

The S&P 500 jumped 2.2% higher for the week on the back of better-than-expected U.S. jobs report. And at home, the STI has surged 272 points, or 10.3%, in the year to date. So, what lies ahead?

If there is no bad news from the European / Greece problems over the weekend, markets are likely to open higher on Monday. As mentioned last week, the STI is likely to challenge the gap 2,943 – 2,974 (formed on 5-8 Aug 2011). In addition, there has been a surge in trading volume and interest in small caps recently. As such, I would like to share my observations on two stocks.

For the avoidance of any doubt, with regard to the two stocks below, I am not saying or implying that they will definitely rise or fall. I am just stating my observations on China Animal’s interesting sell queues and Kreuz's potential bullish technical setup.

Wang Yan Gang, Chairman of China Animal Healthcare (right), at the IPO of his company in 2008. He aims to say sayonara Singapore by delisting his company. NextInsight file photo

a) China Animal Healthcare: This stock remain at $0.240 – 0.255 level despite the market rally. For readers who monitor this stock, you would probably be aware that there seems to be large sell queues between 0.245 – 0.270 (+/- one level).

These sell queues have amounted to 6m to 10m shares daily since the start of January. I think that if there really is a fund or substantial shareholder which has so many shares outstanding and would like to exit China Animal, they (being sophisticated investors / traders) are unlikely to put so much in the sell queue as it defeats their purpose of exiting.

b) Kreuz: Depending on how one sees it (charts are indeed subjective), Kreuz is in the midst of breaking out or has just broken out of a double or triple bottom formation. This is a potentially bullish formation. Personally, I think if it can breach $0.370 convincingly, this may set the stage for a potential upward move to around $0.41 – $0.45.

Notwithstanding the above, there are some noteworthy events from mid week onwards, namely:

a) Greek debt talks regarding the second bailout and the bond swap deal are likely to come into focus. Greece Finance Minister Venizelos said he would speak on Saturday afternoon by teleconference with the other eurozone finance ministers and they would convene a meeting on Wed (instead of the originally scheduled Mon) to discuss and (hopefully) wrap up the talks;

b) Besides the Eurozone Finance Ministers Meeting on Wed, there is a plethora of data on Thurs. For example, China will be releasing its CPI and PPI data on Thurs which may affect market expectations of the loosening of China’s monetary policy. Secondly, ECB and BOE are meeting on the same day and market watchers would also be watching them closely.

Bloomberg reported last Friday that many market strategists from the big banks have turned positive. Readers should take a read to get a balanced view.

Notwithstanding the change in market sentiment, I do still maintain that the rally in January may not be sustainable in the months ahead for reasons indicated in my previous weekly newsflash http://ernestlim15.blogspot.com/2012/01/what-lies-ahead-for-this-week-bull-or.html .

To add to the list of reasons, according to Washington Post, Israel is likely to attack Iran in April – June if sanctions don't achieve the desired goal of stopping Iran’s military nuclear program. Another uncertainty in the making…

Lastly, it is extremely important to note that the above is my personal opinion and may not cater to your specific risk profile etc. The question of when to buy / sell and what to buy / sell differs greatly from individual to individual.

Furthermore, it is extremely important to bear in mind that the market outlook is never static. It can change suddenly - some events that impact markets can happen as quickly as overnight.

STI supports and resistances are:

Current: 2,916.26

Support 1: 2,905

Support 2: 2,877 – 2,883

Support 3: 2,858

Support 4: 2,839

Resistance 1: 2,935

Resistance 2: 2,943

Resistance 3: 2,974

Resistance 4: 2,997

*Supports and resistances are not static levels. They may be subject to change daily.


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