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Last week, we wrote that the Philippine Stock Exchange Index (PSEi) will either move higher or it will return to the range and continue to consolidate. True enough, the index returned to the trading range and continues to consolidate. Let us be clear that this is neutral news.
PSEi has tested the 65-day moving average at 3214 before ending the week at 3265. The index continues to be bullish even as it moves sideways since the setup of the 3 moving averages are still in the bullish mode.
The MACD confirms that we are in the midst of a consolidation as it is oscillating around the zero line. There is no clear sign of bullishness or bearishness in the chart.
The prudent thing to do for this week is that we should be able to take our profits quickly and not be too quick to re-enter the market until a clear bullish signal is given.
The Philippine Stock Exchange Index (PSEi) gave many traders something to cheer about last week. It was able to surpass the year’s high of 3342 by reaching a high of 3367 on Friday, signaling what could be a chance for the index to rise above the current consolidation. It has been observed that the PSEi has been trading within the range of 3147 and 3338 and it has recently breached the range. However, this does not necessarily mean that we should all rejoice and start a buying spree as this recent breach is still not indicative of the start of a new trend. It is quite possible that the index could just continue its sideways movement.
Since the PSEi momentarily breached the uptrend support on May 25, it still didn’t break that as the 130-day moving average supported the index which then led to it continuing on a higher level. The MACD lines have started to move higher indicating that the index could be readying itself for a short term run. But until we see that PSEi does move much higher than current levels, it is best that we still stay conservative with our trades.
Overall, since the uptrend support of the PSEi remains intact, we are still bullish with the market. So our best case scenario with the index is that it is poised to go higher soon. The worst case scenario is that it will just continue the consolidation.
The Philippine Stock Exchange Index (PSEi) was able to recover the losses that the index suffered the previous week. From a high of 3342, the index has fallen to as low as 3093, which was quite bad as we were looking at 3145 as a critical support. The good news is that the index looked strong in the last two trading days. The bad news was that the volume did not increase significantly, which now makes the rise quite doubtful. If we are to look at the support line drawn since the low of March 2009, and connected to the low of May 2010, the PSEi is still respecting this trendline. However, looking at the bigger picture, the index is showing signs of sideways movement since March. What is not clear is what direction the index is deciding to take.
The 130-day moving average has been acting as a support to the PSEi, Unfortunately, because the index has already pierced the 65-day moving average, it now gives us an impression that weakness is setting in.
Since August 2009, we’ve noticed that the PSEi has been rising steadily, however the MACD has not followed suit. This is a clear case of bearish divergence. This only means that our current trend could be reversing soon.
There would still be some buying opportunities in the market but we should be quick to take profits as the direction of the market has become uncertain.
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.
Following the one-day debacle of the DJIA, the Philippine Stock Exchange Index (PSEi) also opened weak on May 7 to regain most of the loss. In short, it was still a down day yet it had bullish implications. What we were expecting from this day was a one-day reversal that will push the index back to near its highs. True enough, the next trading day saw the PSEi gap up very significantly due to the DJIA’s 400 point increase on May 10 and the generally peaceful elections that we had on the same day.
If we take a look at the support line that we drew since the low in February, the index has returned above the support and is now making new 2 year highs. In fact, when we take a look at how low the index has dropped, it did not get to breach the 130-day moving average at 3070. Now that the PSEi is back above the 3 moving averages, we are back to being bullish about the market.
However, the MACD is acting differently. Our index has been moving higher yet when we take a look at how the MACD has been performing, it has been moving lower. Normally the MACD, which is derived from how the index has been doing, should follow the direction of the prices. Yet in this case, it has diverged from what we’ve seen. This is a bearish divergence, indicating that the trend of the market may soon reverse.
It may be wise for us to liquidate our winning positions and wait for opportunities to come before we decide to do anything.
The Philippine Stock Exchange Index (PSEi) looks very similar to the DJIA as it also recently stopped going higher and broke the support line at 3215 and ended 113 points lower on May 5. When that happened, the index formed the bearish formation called the double top. We were looking at 3145 to serve as our support area. Once this area was broken, we know that this double top was pointing to a possible downside target of 2985.
On May 7, we imitated what the DJIA did, which was to drop by 94 points intraday. However, the PSEi was resilient enough to recover most of what it lost during the day and it ended at 3142, 25 points lower than the previous day. Although it seemed like a relief that majority of what was lost was regained within the day, the index still ended slightly below the support level of 3145.
The PSEi is still considered somewhat bullish as it is still above the moving averages, but since it already breached the 50 and 100-day moving averages, it may be a point of concern as bearishness is setting in. The other point of concern is the MACD, as the fast line has accelerated in its downward direction. For the moment, it is still above the zero line, but we see that it’s only a matter of time before the fast line crosses below the zero line into bearish territory.
What is happening now to the PSEi is a cause of concern as it showed people were panic selling as they expected the whole market to be following what the DJIA did, which was to end 3% lower. Our index ended around 0.8% lower, owing to the fact that many went on a bargain hunting spree as many of the index issues have gone down to more tolerable levels. Hopefully the worst is over as we expect there could be some follow through buying on Tuesday based on last Friday’s resiliency. If the index ends up much higher than the 3142 level from Friday, then we can now consider the double top to have failed and the sentiment would automatically be bullish once again.
For the past two weeks, we have been bullish with the mining sector and with good reason. The first reason is that gold has still been continuing to go to higher levels and we are still expecting this precious metal to land somewhere between $1200 – $1300/oz. soon. We see two more reasons to be bullish.
Silver
Check out the 5 year chart of silver. Sometime in the 2nd quarter of 2006 up to the 3rd quarter of 2007, it has produced an ascending triangle that pushed this commodity to higher levels; specifically from $14 to $20, within a span of 4 months on breakout of the pattern. After making a high at around $21, silver has descended from there, to the low of around $9 near the end of 2008 and bouncing back to its current level of $18. On the big picture, silver is looking to create a continuous inverted head and shoulder, where the right shoulder is still being created now. At the same time, when we examine the right shoulder, it is in itself another continuous inverted head & shoulders in the making where the head has already been completed. But we’re still waiting for the right shoulder to form.
When this breaks the neckline at around $19, you can bet that silver can go to new 5 year highs of around $30 or more. The other indicators are confirming the current bullish state of silver. So this is reason number 2 to be bullish about local mining stocks.
Nickel
Here we see the 5 year chart of nickel where after reaching a high back in the 3rd quarter of 2007 of around $24/lb., nickel has dropped to lows of under $4/lb. But after that, it has been able to bring itself to higher levels and has in fact create a bullish cup & handle formation from the 4th quarter of 2008 to the start of this year. It has already broken out from that pattern during the first quarter of 2010 and still looks to move even higher, to an upside target of around $15/lb. It is currently at just over $11/lb.
This is our reason number 3 for being bullish on the mining industry. Three of the more precious metals being traded in the commodities market have been showing signs of bullishness for quite some time.
But which of the mining stocks in the PSE are we really bullish about since there are quite a few listed?
You’ve already read it before and we are reiterating our bullish sentiment for ORE.
If you have been following ORE since the time we gave our recommendation, you would know that it has been resilient to the panic selling the other week, and has maintained its composure and it looks ripe to fly this coming week.
We’ve already shown you the cup & handle formation from before, but if you haven’t noticed it, a symmetrical triangle has already formed acting as the handle. Add to that, a pennant has also formed at the end of the triangle to set itself up to breakout of this pattern.
Concentrating on the triangle alone, we foresee that it will break the resistance of 1.96 and go for an upside of 2.55. Expect this to meet some resistance around 2.02 as this was the previous high and many who were stuck at this level would be selling.
Now, if you feel very bullish about ORE and are not satisfied with just the target of the triangle, then you could still hold on to ORE and wait for it to reach the target of the cup at around 3.70, but this will take a while.
Whatever your poison, be glad that something is still giving you the opportunity to make money as most have already flown or have already retraced. It’s now just a question of how long your patience will go.
What should we expect from the week before elections? On one hand, we can expect a correction for two reasons: the 158 pt. drop of DJIA on Friday and the bearish outside day experienced by the PSEi.
The bearish sentiment coming from the US is understandable as more often than not, whatever happens there spills over to here. The bearish outside day is one more reason why we won’t expect the market to move higher before elections as it made a higher high and lower low compared to Thursday’s movement. This only means that people were more bearish on Friday for one reason or another and the selloff will extend into this week.
Even if people will be selling, I see this as nothing more than a correction, not a bear market. The PSEi has shown us many times over that it has been resilient despite the odds. Add to that, all indicators (moving averages & MACD) are also showing us bullish signs up to this point.
However, that doesn’t mean that we are free to trade with abandon. Play it safe until things clear up. If you have profits, take it since there’s nothing wrong with that. If you’re liquid and not sure where to put your money, it’s alright as sometimes having cash only is still a good position.
First the bad news. The PSEi continued the downtrend from last week due to the fallout from the Golman Sachs fiasco in the US. We reached a low of 3145, coming from a high of 3322. The good news is that we’ve rebounded from the recent low to close slightly higher at 3244. Better than the week’s opening of 3232.
The question now is where do we go from here? Based on the last few days’ performance, it looks like we still have some momentum to move higher. The moving averages are still confirming that the index is still bullish. However, the MACD is entering a correction phase. But with the recent days’ moves, the descent seems to have been arrested and may soon start ascending again.
Should this really be the case, there are going to be opportunities that will present itself.
One of the few stocks that has been grabbing my attention for the past week has been Oriental Peninsula Resources or ORE. It was last spotted creating a base around 1.50 to 1.62 before it started moving higher. It was able to close at the high of 1.90 as of this writing.
The pattern that ORE is making started roughly around April 2008. From the 2 peso level, it has descended to as low as 50 centavos before climbing back. Trading from that time up to January 2010 has been spotty and/or uninteresting…until February.
We saw a rapid run in February starting from 80 centavos up to 2.02. From the retest of that level, ORE has retraced back down to as low as 1.48. Since that time, it has slowly built its base around that area. It started to climb from that base on tax day, Apr. 15. Right now, it’s just a stone’s throw away from retesting 2.02.
All the indicators are positive. The moving averages are supporting the price of ORE and they are in the bullish setup. The MACD has retested the zero line but has also pushed itself above that area giving us a bullish sentiment. In other words, everything is looking good for the stock.
Should the trend continue, I will repeat the figures written in our hitlist on the right side of our site. The resistance is at 2.02, so once this is surpassed, a breakout buy is placed at 2.04, with a minimum upside of 3.70. Should things go wrong, cut your losses at 2.00.
It’s good that we were able to spot this before it moved. At least you now have an opportunity to gain a potential 82% on your profits. Please note that prices won’t move directly all the way to the target and there will be corrections in between.
B - Buy T - Target S - Stop / Cut Loss BE - Breakeven. Move stop / cut loss to your buying price. TBD - To be determined. Market - When buying, this is the opening price or better. When selling, this is the current price or better. Wait - You wait. Open - The trade recommendation is triggered. If you just read the status update and you are still not in the trade, you might be too late. In such cases we would recommend that you do not take it. Cancelled - The trade idea or recommendation was cancelled. Closed - Trade recommendations will be closed once the trade is exited
