StockWatch (Nov 3-7, 2008): PSEi

PSEi (Chart: Daily Resistance: 2030/2350-2400 Support: 1684)

Looks like the long awaited correction is here. The index plunged further on the first trading day last week, but was able to regain losses by the end of the week. The index is now approaching possible resistance at 2030, which is probably a retest of the previous support-turned-resistance. If this is broken, the next possible resistance is at 2030-2400 then 2680.

The last trading day ended with a white candle recovering all losses last Monday. If my chart is correct, we can see that the volume was very significant on the last trading day. This may be an indication that this rally may last for a couple of weeks more before doing a return move downward.

Looking at the weekly charts, it can be seen that a last week’s trading was a hammer which is a bullish sign if found at the bottom of a trend, which is what we currently have. Up until when will this bullishness remain in the market is anyone’s guess.

The MACD is poised to cross above the signal line in probably a week’s time and this may spur further buy signals. However, the whole MACD is still below the center line, so if you are to enter the market, keep the stock only for the short term. Sell on signs of weakness.

There are a lot of resistances along the way up, so don’t expect that the index will immediately recoup its loses. I would like to see the index go up, rest a little, then go up again, rather than zoom is way up with out a rest.

General Note:
There are a lot of stocks that are currently reacting positive to the recent rally. Since the market is still generally bearish and the rally last week may well just be a reversal for the short term trend and not a reversal on a bigger picture. Observe possible resistance lines where the stock previously broke down. It is highly likely that the current rally is just a return move to test the resistance. If you are to enter some stocks with these characteristics, it would be best to sell near the resistance and lock-in profits immediately.