StockWatch (Aug 20-24, 2007): PSEi, PAX, JFC, DGTL

PSEi (Chart: Daily Resistance: 2940/3100/3220 Support: 2740/2440)

The index went thru the 260day MA, even breaking the long term support line connecting the peaks from 2002 and 2006. Next support level is at around 2740, the long term support line connecting the peaks of 2002 and 2005 and afterwards at 2440, the support line connecting the troughs of 2003 and 2006. With last Friday’s Fed’s intervention in the US market by cutting the discount rates, hopefully our local market would also react positively with that event. There is still no sign of reversal, so it might be possible that upward moves maybe short lived due to heavy selling from those who were stuck in the 4 weeks straight selling. Resistance at 2940/3100/3220 which are previous highs.

PAX( Chart: Daily Resistance: 14.25/15/16/17.50 Support: 10/10.75/12)

On a bearish market, RSI goes way below the oversold level of 30. This somehow got my curiosity to find the stock that has the lowest RSI to date which eventually led me to PAX. The RSI of this stock is currently at 6.69, the lowest of all stocks actively traded. On further observation of the price movement, this stock also has a couple of other stories to tell. The prominent things I’ve noticed on this stock are the gaps. If my analysis is correct, the price movement may have formed a break away gap, runaway gap and an exhaustion gap. The exhaustion gap coupled with the RSI is somehow telling us that selling momentum for this stock maybe near its end. What may happen in the week to come is the probable formation of an island reversal or probably a short upward move then a sideways movement. Expect heavy resistance at those levels where the gaps were made. This can be a candidate for range trading. If you could get this stock at 12, you can sell at 14 for a 15% net profit. Cutloss is at 11.50. Word of caution, even though there are signs telling us of possible end of the selling momentum, there is still a possibility that price may further move down. Next support levels are 10/10.75. The price 10.75 is the support line connecting the troughs of 2003 and 2005. While 10 is a logical support and previous low.

JFC ( Chart: Daily Resistance: 50/51/54 Support: 44/42.50/39)

JFC may be forming positive divergence. Both the RSI and MACD are registering higher lows, while the price is registering lower lows. The positive divergence is not yet confirmed as price still has to form the trough. At this point, the price may further register lower low and may drag both the RSI and MACD with it thereby invalidating the positive divergence. However, even if the positive divergence is confirmed it may take a while before the stock starts to move the opposite direction.

DGTL (Chart: Daily Resistance: 1.20/1.40 Support: 1.10/1.02/0.88)

DGTL is also showing signs of positive divergence. Both RSI and MACD are registering higher low while price is registering lower low. The divergence is still not confirmed as the trough still has to be formed and price may still move further down dragging the RSI and MACD and invalidating the positive divergence. Price at 1.10 is a support level, this is the support line connecting the troughs from 2002, 2003, 2004 and 2006. It’s a wait and see this week if that support line will hold.