PSEi (Chart: Daily Resistance: 2870/3000/3200 Support: 2620)
“Wow” and “Oh no!” were the first words that I uttered when I saw the index plunge 120 points. I was expecting that trading for last week would be lethargic due to the holiday mood, but it seems that the bears were not taking a vacation and the bulls were the one’s who were out on vacation. The first day of trading last week already broke the support at 2870, that was the “Oh no!” part. The double top area pattern has come to life and the gloomy outlook for our index would be a downward target price of 1950-1820. It is also worth pointing out that the DJIA rallied 400 points up on the expected rates cut by the Fed, but sadly our index did not follow this wild ride up. The fact that the sell down was stronger than the buy up and that our index did not react very much to the DJIA’s rally further confirms the breakdown.
Looking at our index from 2003 and drawing a channel from that time frame up until now, our index is still within that channel and using that channel the next support is at 2620. If that support is also broken, then we can conclude that the bullish move from 2003 has ended.
The last trading day for the DJIA last week had an upward move. I could only speculate that our index would follow, and hopefully have a rally as most of the stocks are still very much oversold. For those who are still stuck, this would be an opportunity to get out of the market for the mean time. For those who plans on playing the rally, just make sure you would be able to react fast once the rally ends. Watch out for support-turned-resistance at 2870 and 3000. Another possible resistance is at 3200 which is the 38.2% fib retracement and 3333 which is the 50% retracement from the downward move since October last year.
Bullish Divergence?
AC and SMPH are showing signs of a bullish divergence in their RSI. AC can possibly go up to 450 while SMPH up to 9.00 just based on their previous highs. However, given the current condition of the index, one would have to be cautious in trading these stocks because even if these are showing bullish divergence, there is no guarantee that it would still be bullish once the selling momentum is started.
AC (Chart: Daily Resistance: 400/465/482 Support: 382/370)
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