StockWatch (Mar 30-Apr 3, 2009): PSEi, EDC, SMC

PSEi-Monthly Chart

PSEi Weekly Chart

PSEi (Chart: Daily Resistance: 2048 Support: 1992)

The index showed strength on the opening of the market last Monday with a gap up accompanied with a large volume. It zoomed past the 65 day MA(red line) and closed just above the 130 day MA (yellow line). The index was also able to move above the logical resistance at 2000, which for the past 3 months has been impenetrable.

The MACD is currently giving us a bullish signal, however, the RSI is displaying overbought signal, so for the coming week, expect to see some selling activities or some sideways movement for the index.

Looking at the weekly and monthly chart, we can see that the bullishness for the past weeks is also reflected in the weekly and monthly chart with the long white candles being registered with good volume. Both charts are also giving us a hint that there may be more to this recent market activity. The charts are displaying comfortable levels of RSI which means there is more room for further growth. MACD for the weekly chart is bullish on the short term, while the MACD in the monthly chart seems to be starting an arch upwards.

The recent market activity is definitely something to hope for, but we still have to be cautious of our trades. There are still lots of resistance on the way up, observe your cutloss levels if incase things turn south. As I have mentioned above, for next week, expect some correction or sideways movement in the market. If you intend to get in the market, observe stocks that would display good support levels.

EDC Monthly Chart

EDC Weekly ChartEDC(Chart: Daily Resistance: 3.90 Support: 3.30)

EDC had a breakout on Wednesday last week. I recently thought that this stock would not do a breakout because of the recent large volume selling on Thursday (Mar 19) and low volume on the white candle on Friday (Mar 20). But on Monday last week, the volume on the buying action matched that of the volume on the Mar 19 selling action which eventually lead to a breakout on Wed. The strength is also evident in the weekly and monthly charts.

I am expecting that the market would slow down next week and coupled with the overbought state of the RSI, be on the look out for a return move towards the support at 3.30. Target price for this stock is near 4.80. The return move towards 3.30 is healthy if there is not much volume on the selling action and support is ketp intact.

SMC( Chart : Daily Resistance: 52/58 Support: 41)

SMC is eerily forming a head and shoulder pattern, however, this type of pattern (not the inverse head and shoulder) would usually occur only on market tops, so I believe that this is not a valid pattern. But, looking closely, there is another patter though that is much more valid in the current market, which is a big double bottom (looks like a big butt). The neckline for the double bottom formation is at 58. MACD is above the center line, so this means we can go long on this stock. If you intend to grab a piece of action in this stock, you would have that chace for the coming week as the stock is expected to correct first before having any further upward movement.

General Note: A lot of stocks are already overbought because of the recent rally. Do watchout for stocks that would display strong support levels for the coming week. Next week might be a good time to get in the market as long as selling does not have volume and support levels remain intact.