PSEi Outlook for May 24 – 28, 2010

Posted by Bonner Dytoc
Monday, May 24, 2010 7:53
Posted in category Uncategorized

The last trading day of the Philippine Stock Exchange Index (PSEi) was not necessarily  bullish, even if it closed at the high, regaining half of what it lost initially.  The index was down by as much as nearly 66 points, yet the PSEi was able to recover and closed at 3179.36, which is still 34 points down.  What happened was that, in reaction with other global markets, the index had a knee jerk reaction by following a massive sell off as expected by many.  Yet sometime in the middle of trading, the bargain hunters decided to show up once again and pick selected stocks whose prices were tempting enough.

The PSEi is still surviving as far as bullishness is concerned.  However, we feel that this may soon end as the index has already shown us that it broke the uptrend that started sometime mid-February.  Add to that, the index gapped down twice, telling us that people were dumping their shares to preserve what’s left of their capital.  Also, the index has formed what looks like a triple top formation, which is a bearish reversal pattern.  Should the level of 3145 be broken, we could see the PSEi drop to a downside target of 2963.  But before that happens, the index has to surpass the 2 moving averages at 3163 & 3089.  These two are acting as immediate support areas.

Confirming the bearish sentiment in the index is the MACD, which is now slowly approaching the zero line.  Once it crosses below the zero line, then we can already say that the MACD has entered bearish territory and the index will also be bearish by that time.

There are a lot of issues that have shown weakness over the weeks and these may be contributing to how the PSEi has been performing.  The most prudent thing for us to do is to liquidate positions that have some profit but look troublesome.

Recommendation: Take profits:
Support: 3145

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