StockWatch (Apr 16-20, 2012): PSEi

PSEi (Chart: Daily      Resistance: 5100         Support: 4980)

The index is now starting to form a downward trend.   We can see from the chart that the index has bounced off from a new support line which is part of the downward channel.

The last two trading days of last week created white candles but it still remains to be seen if the index can move above the resistance line near 5100.   If it does move above that level, it is a welcome move for the index. However, if it is unable to move above the resistance line, then it confirms the strength of the newly formed downward trend.

Do observe the RSI, lately the index has been respecting the significant levels of the RSI, particularly the 50 and 70 level. Since early Feb of this year, the RSI has been moving between 70 and 50 level.  Every time the RSI hits 70, it starts to go down, and does the opposite when it hits 50 level.  Right now RSI is moving towards 70 level, so expect a possible reversal when it hits near 70. 

StockWatch(Apr 09-13, 2012) : PSEi, MEG

 PSEi – Weekly Chart

 PSEi (Chart: Daily Resistance: 5146 Support: 4920/4600)

The index seems unable to move further upward since the highest recorded level at 5146.  Since then, the index has been sluggishly moving in small increments at a time compared to previous weeks.  We may be seeing a slowing down of the index and for the coming weeks, with the index moving sideways to downwards.

The MACD is now opening wide downwards, which is a bearish indicator. MACD seems to be pointing to the possibility that the index’s sluggishness and inability to move higher may be the starting point of the downward movement of the index.  The MACD on the weekly chart seems to support this idea as the MACD is now starting to move closer to the signal line.  

If the index starts to move downward, the next support would be near 4920, which is the level of the 50 day moving average. Should the index move further down from this level, next support would be near 4600 which is the 38.2% Fibonacci retrace from the start of the index’s rise from Sep 2011 up to the index’s highest in Mar 2012.

MEG (Chart: Daily Resistance: 2.10 Support: 1.96)

MEG recently had a milestone improvement. The standing resistance line from more than a year of downward trend was broken last Mar 12, but the problem then was that there was no volume on the breakout event and so the stock price fell down below the previous resistance line.

On the next breakout event though, things have changed. The stock steadily rose to a new high for the year at 2.10 accompanied with significant volume on every step of the way.  This confirms that this stock is now again the in the buy list of traders.

The recent downward movement last week was a healthy correction and we can see that 1.96 seems to be a strong support for this stock in the recent trading.

Trading for next week would confirm the strength of this stock if it continues to move upward.  If it does move upward next week, I can say that this stock would be a good stock to hold if you need a stock to park a portion of your money for the long haul. It has the potential of moving up towards its previous high near 2.84 which is near 50% profit.   Its short term target price would be near 2.25

StockWatch (Mar 12-16, 2012) : PSEi (Hanging man on PSEi Weekly Chart)

 PSEi Weekly Chart

PSEi (Chart: Daily Resistance: 5040/5090 Support: 4960)

The index is still following the upward channel that was established since Jan of this year.  The good thing is that the market is a little bit predictable because it is following a channel pattern.  But the bad news is that the index is still creating more negative divergence as the index creates new highs.

The new negative divergence is again visible in RSI, MACD and Stochastics, with the index moving higher, but those indicators are moving lower.

Aside from the negative divergence, it seems also that there is relatively lesser value turnover compared to value turnovers for the past month, which means lesser money is being played in the market.

Looking at the weekly chart, we can see that there is now a hanging man formation. A hanging man formation is a bearish indicator and is usually seen on upward trends. This usually marks the top of the trend.  However, a hanging man still needs to be validated by further indicators.

For next week, for the risk averse, I would suggest that you stay on the sidelines for now. There are lots of negative indicators being displayed in the chart and if you are not quick enough to react, this may cost you.   For those who still would want to ride the market, I would suggest that you religiously observe the current resistance and support levels of the upward channel.

StockWatch (Mar 05 – 09): PSEi

PSEi(Chart: Daily Resistance: 5090 Support: 4900)

The index dropped 100 points on the first trading day last week, but proved to be non deterrent for bullish traders who pushed the index from the low of 4790 up and beyond the 5000 level ending at 5016.

From the chart, the index was able to get back inside an upward channel with resistance near 5090 and support near 4900. We have to wait and see if the index is able to move above the resistance line.

If you got in the market again last week, I would recommend going back in a range trading strategy, but as of the moment hold off the buying as the index is near the resistance line and then start selling when the index nears the resistance near 5090.

I would also suggest to appropriate lesser portion in trading. I still see that there is imminent danger, considering that the index is moving higher but the MACD, RSI and Stochastics are generally moving lower.   Be on the watch for negative divergence when the index reaches resistance near 5090.

StockWatch (Feb 27 – Mar 2) :PSEi (Doji on the weekly chart)

 PSEi Weekly chart

PSEi (Chart: Daily Resistance: 5000 Support: 4855/4790/4730)

Some good news and bad news happened last week.  Good news is that the index is able to create a new high just 3points shy away from 5000. The bad news is that it was not able to sustain that new high and then created black candles.

The trading action last week also created a negative divergence, with the index moving higher and the RSI moving lower.  It looks like we are seeing more and more of the negative divergence these past weeks.

Another signal worth observing is the black spinning top created last Friday.  Spinning tops in general are signs of indecision.  And as you can see, the spinning top last Friday is clearly validated by the trading action for that week where the index moved sideways.  However, spinning tops found on upward trends should light up a warning signal. This means that traders previously bullish about the market are now having doubts and are pulling away from the market.

Looking at the weekly chart, we can see a stronger warning signal flashing right before our eyes: a Doji.  A Doji also denotes indecision, BUT relatively stronger than a spinning top.   When found on upward trends, this sometimes signals impending reversals, but of course one needs to qualify that with other signals.   From the weekly charts, the Doji’s claim or warning is somehow being supported by the RSI as well, which is now beyond the overbought level of 70.

For next week, I would recommend to cease buying, hold what you have for now or better yet, start selling portions of it.   We have our next support near 4855 (blue short horizontal line) which was the previous high and almost near the support line connecting the troughs from Jan 26 to Feb 16 (blue diagonal line).  If the index moves lower than that support line, that should also serve as a signal to start disposing you positions as we may be seeing the index move lower towards near 4730. 4730 is the previous resistance turned support line connecting the peaks from Feb 6 to Feb 16 (orange diagonal line).  If 4730 holds, then I believe that this would be a good time to get in the market again.