StockWatch (May 26-30, 2008): PSEi, ALI

PSEi (Chart: Weekly)

PSEi (Chart: Daily Resistance: 2900 Support: 2760)

The index had a very good 2 week rally which ended last week. Currently the index is seen to have gapped down last Thursday, forming a possible island reversal of the recent rally. Some points to take note: A.) The index broke above the long term resistance line from December 2007. This I think is a positive move for the index, even though the index recently created a lower low, it is now above 2 resistance line, one from Feb 2008 and the other from Dec 2007. It’s one small step at a time towards the index’s recovery. B.) The MACD is now just a few points away from crossing the center line. But the bulls would still have to fight for the right to cross the center line, as it is common during bearish market that the MACD center line usually acts as a resistance. We can expect that there will be further MACD consolidation near the center line, before it moves above. C.) Just like the center line of the MACD chart, the 50 RSI level usually acts as a resistance area during bearish market. We can expect the RSI to form a higher low this time, probably encountering support at around 30-35 RSI level. D.) Looking at the weekly chart, we can see a positive move by the MACD, which is in position to cross the signal line.

For the coming week, the index may move lower as an effect of the gap down. So it is better to lock in any gains that were made for the past 2 week’s rally. For those trading the volatility, next possible entry is when the RSI reaches 30-35 levels.

ALI (Chart: Daily Resistance: 11.50 Support: 9.50)

ALI is showing signs of a possible double bottom. The neck line of the double bottom is at 11.50. However, it seems that resistance is now being encountered even at current price level of 11. The general market sentiment is still bearish, and this double bottom that we are seeing might not materialize. But a positive thing to point out is that MACD is now above the center line and price is now above the 65 day MA. Hopefully the 65 day MA would provide support and MACD would stay above the center line.