PSEi (Chart: Weekly)
PSEi (Chart: Daily Resistance: 2470/2520/2630/2780 Support:2340/2289)
The PSE index felt the shockwave of the global sell down due to the successive bankruptcy announcements of the large US financial institutions. The index fell 200 points for two trading days and even moving way below the target price of the previously observed descending triangle. On the last trading day there was a reprieve from the sell down with the index gapping up and closing higher. This gap up formed a small island reversal pattern and even with a very good volume. The question is, now that we have an island reversal is it now the time to get in the market again? Probably if your investment objective is for the short term, I would say YES as the island reversal is a very clear indication that things will start to move the other way around. But for the long term, I would suggest to wait it out first before moving in the market, for the reason that the MACD is now below the center line suggesting a bearish outlook. Also looking at the weekly PSEi chart, we can see that the sell down that happened for the past two weeks had a very significant volume. With that large sell down volume, the index will find it a little bit harder to move past the resistances and it may take a while before investor confidence returns.
In the previous weeks, I have been pointing out a possible inverse head and shoulder formation. With the 2 week sell down, the inverse head and shoulder pattern that we are following got invalidated. But on the bright side, we may be seeing a formation of another possible reversal pattern, which is a double bottom. The sell down last week could probably have formed the second bottom of the double bottom formation. The possible neckline for this formation is at 2780. The complete formation of the possible second leg may take some time, probably around 1-2 months.
For those with short term investment objectives, watch out for resistances at 2530, 2630, 2700. Liquidate immediately if the index shows signs of weakness on those levels.
For those with long term investment objectives, watch out for the MACD moving above the centerline before getting in the market.
AC (Chart: Daily Resistance: 320/305 Support: 260/250)
AC seems to have formed a strong support line extending from July 2008. The stock bounced off from this support line,which may possibly be part of a symmetrical triangle. It is still too early for the breakout or breakdown of the symmetrical triangle, but it is worth following.
MEG (Chart: Quarterly)
MEG (Chart: Daily Resistance: 1.50/1.60 Support: 1.28)
Looks like MEG survived the market sell down with the help from the support line that extended from July 2008. This support line was tested for the third time and it has proven its strength against the recent market turmoil. Looking into the quarterly chart, it seems that this stock will be ending the third quarter with a superb performance. As we can see, the quarterly chart is displaying a white candle with a large volume, larger than the sell down volume of the previous two quarters. So what does this mean? Well in my opinion, we are seeing investor confidence going back into this stock. This is not yet conclusive, but it is a positive indicator for the stock. Given that indicator, and at the current price level, this may be a good find for those who would like to go long for this stock. Watch the small symmetrical triangle, breakout may happen within the next 2 weeks. Modest target price for the symmetrical triangle is at 2.10.
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