This blog is committed to the serious study and valid understanding of technical analysis and its objective application to stock selection, risk management and execution primarily in the context of trading stocks listed in the Philippine Stock Exchange (PSE).

Friday, February 15, 2008

PSEi 2/15/08, WEEKLY MARKET REVIEW



PRICE AND TURNOVER
Close: 3,182.85
Change: -28.75pts/-0.90% (Daily) -58.28pts/-1.80% (Weekly) -430.13pts/-11.89%(YTD)
Value: 3,035,601,000

MARKET BREADTH
Net adv/dec issues: -20(Daily) -74(Weekly) -666(YTD)
Net up/down volume: -65,167,310(Daily) -1,956,197,210(Weekly) -6,738,115,443(YTD)
Net foreign buying: +18,071,917(Daily) +307,984,252(Weekly) -12,419,103,212(YTD)

TECHNICALS
Trend: Major trend sideways, intermediate downtrend, short term downtrend
Support and resistance: 3,000 / 3,400

OUTLOOK
Today, the PSEi gapped down at the open declining by around 30pts within a half hour into the
trading session. It quickly settled to trade within a tight range for the rest of the day closing very much near the day's low. The sellers were in complete control for the entire duration, the buyers didnt come to party today. The gap and the close near the low could mean a supply overhang that could spill over to the next trading day.

Looking at the daily timeframe, the chart shows the intermediate term unmistakeably on a downtrend and the short term trend seemingly beginning a fresh downswing after a failed test of the trendline resistance. There are no contrary evidence to suggest that the declining trend will change anytime soon. The index remains within reach of the trendline resistance so any off chance near term break to the upside should be a signal for us to observe a little more closely.

Shifting to the weekly chart, we see the major trend in a range pattern traversing between the
bounds of 3,000 and 3,900 since July2007. Both extremes are touched twice which qualifies with the textbook definition of a box/range pattern. More ominously, the movement within the range unfolds into a developing double top formation the completion of which could lead to a potentially huge move lower. The shorter declining trends are bound to inevitably drive the index toward 3,000 which is the base of the pattern. In the grand scale of things, this for me is the most important level to look out for because if the base is breached and the double top pattern behaves as expected, then it could be an early signal for a possible transition from a major consolidation to a major downtrend. Now that is a real big thing.

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