StockWatch (Oct 27-31, 2008): PSEi

PSEi (Chart: Weekly Resistance: 2060 Support: 1850/1800)

Unfortunately the index is still looking for a bottom. It has recently broken support at 2030 which is a previous low of 2006. Looking closely at the chart, it has not only broken the previous low support, but it has also broken a large downward channel that has been formed since the start of the index’s decline Oct 2007. There is still no clear indication of any major reversal but for the following weeks to come, watchout for the following: a) The next support at 1850-1800. This is the target price of the symmetrical triangle break down (symmetrical triangle formation marked as orange lines) and at the same time, 1800 is a previous low from June 2005. If this support level holds, then there is a possibility for the start of a return move towards 2030-2070 level (the support-turned-resistance of the large downward channel) b.) Watch out for a possible island reversal for the short term. The chart has already shown 3 gaps formed since the start of October, so at the current level, we are already in the exhaustion gap phase, so a gap up rally is also a possibility.

A lot of stocks has broken and has gone way below major support lines and most haven’t had any rally from their current lows yet, so watchout for these stocks as these will most likely make a return move near the support-turned-resistance levels. However, there is still no clear major reversal pattern and MACD is still below the center line, so if you are to enter the market, strategy is still to hold only for the short term and sell on the first sign of weakness, or much better, just wait for a clear reversal before entering the market.