PSEi (Chart: Daily Resistance: 2627/2700 Support: 2654/2447)
The DJIA ironically went down with three lucky sevens, and the local index followed. Amazingly it was not as bad as I was expecting. With that huge drop in the DJIA I was expecting a drop of around 200 points for that day. Yes, the index did plunge to 200 points below the previous close, but it went back up and closed just above the 65 day MA. The volume was significant and was followed by another up day with nearly 100 points also with significant volume.
So what does this mean? This points us to three types of traders who were present that day, those who panicked sold down their positions. Those who got lucky are the one’s who were able to scoop up positions near the bottom of the trading day. And lastly those who wished they can still be lucky are the one’s who bought near the top of the action, these are probably traders who are still betting on better gains or those who upon seeing the index rebound from the lows started to get in again.
If you were the trader who panicked and sold down their position, there’s nothing bad about that. It’s a natural reaction, it’s acceptable and it is playing safe. Don’t feel bad about selling your position, cash is also a position. But if you sold down and bought back your position. Then that I think is a recipe for disaster. Selling at a loss is a very emotional event, which sometimes clouds our decision. Usually after selling at a loss, we are still hesitant to enter the market again. But if you entered the market because of renewed confidence within the day, usually it puts us in the situation where we are already buying too late and near the top. Selling at a loss and buying back again within the same day, is not a recommended action, not unless you have already mastered your emotions and are able to act immediately on sudden turn of events. Otherwise, I would advise for you to cool down a bit before moving in again in the market.
If you were the trader who was able to buy near the bottom, then good for you. Better check your stops and adjust them accordingly to protect your profits. This rally is definitely something that will not last.
If you were the trader who bought near the top, you should have already sold your position last week. Even if the rally was good, the market is still considered to be very volatile. Riding the momentum is ok, since there was significant volume and spread for the two days. But on the last day of trading, this should have been a warning to you to already protect your profits and sell for the mean time. The last trading day was accompanied also by significant volume, just ¼ volume away from matching the volume on the 2 day rally. This is already a sign that a lot of traders have started to cash in, and you should have also done the same if you bought near the top. Otherwise, brace your self to be long term investors, if the market turns sour.
The trading last Friday was accompanied by large volume, it is highly possible that selling will still continue next week. A symmetrical triangle can be seen in the chart, but it is still too early for a breakout. The symmetrical triangle is only pointing to us that we are still to encounter ranging actions from the market.
MEG (Chart: Daily Resistance: 1.50 Support: 1.30)
MEG is now in a tight squeeze near the apex of a possible symmetrical triangle. Breakout or breakdown may happen anytime within 1 to 2 weeks. Otherwise if this does not materialize, then we can expect further consolidation for this stock. Breakout point is at 1.50 and a good volume breakout would be 200M shares traded.
BPI (Chart: Daily Resistance: 50 Support: 40)
BPI seems to be forming an inverse head and shoulder formation. Breakout price is at 50. Target price is around 65. Wait for the breakout. It is still possible that this stock may still consolidate a few more days.
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