StockWatch (Dec 03-07, 2007): PSEi, SMC, JFC

PSEi (Chart :Daily Resistance: 3620/3670/3730 Support: 3500)

The index had a very bullish action last week and recovered 30% of the recent downward move. There was an unusually large volume traded last Tuesday and we can probably consider this as a support. One good thing that can be observed in the chart is that the gap up that happened on the first trading day last week created an island reversal, now how high can the index go is still anybody’s guess. Last week also, the incident at the Manila Peninsula did not have much of a negative effect on the index, but it somehow has shown a little bit of indecision on where it will move next as it closed just below the opening level creating a doji. The doji that formed I think definitely reflected the current situation for the index. We have the recently formed island reversal and a 20% recovery from the downward move which are bullish actions, however, due to last Thursday’s incident at Makati, there definitely occurred some hesitations and bearish reactions that prevented the index from closing higher, thus forming a doji. This coming Monday’s trading would be a critical indication of how the market will turnout for the rest of the week. There might be some selling happening when the index opens and that might be associated with the uncertainty and cautious trading. But observe the index closely, if the sentiment is still bullish, the index can immediately pull up from the selling pressure, or probably immediately open higher. Now looking at the DJIA last week, it formed a stalled candle stick pattern (3 successive white candle with the first 2 candle sticks being long and the 3rd a small bodied candle stick) and last Friday's trading had a higher close, but it formed a black candle with large volume, so there might be some bearish sentiment that could affect our local market for the coming week. Watch out for support at 3500, breaking this level might be an indication of a return to downward move. An MACD cross above the signal line is also poised to happen, if it does, then it is a bullish confirmation of the recent upward move that we are experiencing.

Erratum: I earlier posted a wrong info on the DJIA having gained 300pts, it actually gained only around 60 pts last Friday, forming a black candle.

SMC Daily Chart

SMC Weekly Chart

SMC (Resistance: 51.50/54/56.50 Support: 46.50/42.50)

SMC now has an island reversal formed with an exceptionally large volume as shown in the daily chart. Looking at the weekly chart we can see that it fell short of being a bullish engulfing formation, however, the volume says a lot about the bullishness of this stock as it had an exceptionally large volume for last week. On the daily chart we can also see the bullishness as the stock was sold down with low volume, but was bought up the next day with more than double volume when it was sold down. Another bullish indicator is the MACD which is now poised to cross above the signal line. There is no price target for this since we do not have an area pattern formed. The only guide we have for selling are the different resistance levels and also our risk-to-reward ratio. The upcoming resistance for this stock are a.) 51.50, the highest the stock went last week, b.) 54 which is a long standing support that turned resistance when the stock broke down last November, and c.) 56.50, the 38.2% Fib retracement. Watchout for the 54-56.50 levels, those that were able to buy at 45 and below may start cashing in on the stock at those levels. Average volume for this stock is around 300T shares traded, a sell down near or above the average volume may indicate that some have started cashing in on the stock. If the stock was able to go past the 54-56.50 levels with low volume on sell downs, then there is a higher chance that the stock may reach the 65 level which is the 61.8% Fib retracement.

JFC (Chart: Daily Resistance: 51/55 Support: 48.50/45)

JFC showed a bullish movement last Thursday when it closed the gap formed last Nov 20 accompanied with a large volume of about 2.9M shares. The MACD has currently crossed above the signal line indicating a buy. The only hesitation that I have with the stock is that it formed a large upper shadow, which indicated that there was not enough bullish sentiment that could hold the stock at those price levels. However even though it was not able to hold price at those levels, it was able to close the gap formed last Nov 20 which can also be interpreted as a bullish move. We need to watch the succeeding trading days though. Watch out for signs of diminishing bullishness such as high volume on selling days and being unable to close above the 260 day MA. Also watch out for the inverse head and shoulder formation and possible resistance at 54-55 levels.