StockWatch (Apr 7-11, 2008): PSEi,AC

PSEi (Chart: Daily Resistance 3050/3200 Support: 2930/2770)

The index had a continuation of the previous week’s rally with the index moving beyond 3000 level and reaching 3050 as its highest last week. If one would ask if this is a sign of better things to come, well I hope so. But what the charts are telling us at the moment is that we are still inside a bearish phase. If one would observe the RSI and MACD on the bullish phase, both RSI and MACD are oscillating above the 50 RSI level and MACD center line. As compared to what we have currently where the RSI and MACD are oscillating below those lines. It is most likely that the RSI and MACD will oscillate below those lines for a couple more weeks and hopefully this would pave the way for consolidation in preparation for another bullish phase. But ofcourse the bullish phase is still too far in the future. Another item to observe though is a probable inverse Head and Shoulder formation. With the left shoulder that formed last January and the head currently forming. Assuming that the dip in the index last March 17 is the tip of the head, we could probably guess that the head would be completely formed by near end of April. Ofcourse this is still for observation. Trading strategy would still be to stay liquid or if one would take advantage of the currently volatility in the market, trading strategy would be to hold for the short term only. We might see some dips in the index for the coming week, it would be best to protect any gains from the recent rally.

AC (Chart: Daily Resistance: 422.50/430/450 Support: 400)

AC is showing good signs of recovery from the recent downward movement. First good thing to note is that a bullish divergence can now be seen from the RSI and as well as the MACD. Second item to note is that the recent run up that happened last April 2 was able to break above the downward channel that formed since December 2007. The breakout was accompanied by good volume. For the coming week, price would probably trade between 450-382.50. As long as the price does not go back inside the downward channel, AC will still be promising. There is still no reversal area pattern formed, but watch closely as the recent low of the stock at 382.50 might be part of a double bottom formation.