StockWatch (Apr 27-30, 2009): PSEi

PSEi (Chart: Daily Resistance: 2105/2150 Support: 2050/1920)

The index in my opinion is still not in a good shape, even with the recent drop that happened Monday last week. The RSI is still near overbought and the divergence is still intact as of Friday last week. For the past weeks, volume seems to be diminishing in the index. The recoup that happens after the short drop is usually acompanied with volume, which is good, however, volume seems to be diminishing each time the recoup happens.

Another observation for the index is that there seems to be a rising wedge that is forming. However, it’s a little bit awkward to see a rising wedge at this point since the somewhat prevailing trend is sideways and rising wedges are usually seen on a downward trending market. So the rising wedge is still questionable at this point. But I would still advise caution in trading the market or better yet just observe the market for the mean time if the volume still continues to diminish by next week.

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StockWatch (Apr 20-24, 2009): PSEi

PSEi (Chart: Daily Resistance: 2100/2150 Support: 1950)

The index took a dive with large volume at the start of last week. It continued on till Wed, but was able to recoup by Thurs and Friday with an equal amount of volume.

In my opinion, even if the index was able to recoup its losses on the last 2 trading days, the index is not looking very good. The correction, I believe, was again too short and shallow. The RSI is still near the overbought level and in addition, a bearish divergence has been formed with the index creating a new high, while the RSI created a lower high. I don’t see how the index would be able to sustain further upward movement with the RSI being overbought.

I would suggest that if you have any positions, sell for the moment. I believe that a bigger correction may happen any time soon given that the RSI is still near overbought and that the volume hasn’t been increasing relative to previous week’s volume. Also, I have observed that a lot of stocks are way too overbought. So prepare for wild drop.

StockWatch (Apr 13-17, 2009): PSEi, EDC

PSEi (Chart: Daily Resistance: 2330 Support: 1970)

The index had a short stint of selling action on the last days of March which brought the index down to the low of 1965 which is the area of the 130 day MA (orange line). The last trading day for that week had the index running a white candle with relatively large volume. On the following week, the index continued where it left off from Apr 3 and continued with its upward movement. Interestingly the index was alive with volume on the 2 trading days before the holy week. Usually, when long weekends comes up, the index is expected to have lesser volume prior to the long weekend. But Apr 7&8 was the opposite. It had large volume and was moving bulishly. For next week, expect the index to continue with upward movement.

However, please take note that the RSI is now near the overbought level once again. Be on the look out for a possible bearish divergence. We have now posted a new higher high for the index and the RSI should also follow. If it is not able to create a higher high for the RSI, this means we have a bearish divergence on the RSI and selling might follow.

Just in my opinion, I think the correction last March 30-Apr 1 was very short and shallow. This gives higher probability that the expected continuation of the upward movement this week may not have enough steam to keep the index moving upward for a longer time. So I would recommend to keep an eye on your stops if incase the index starts to move south again. The next resistance is at around 2330, which is the 260 day MA(green line). The support is at around 1970, which is the 130 day MA(orange line). It is also important to watch out for the volume on the way up. If volume is diminishing on the index’s upward movement, then this is a sign that it is loosing steam.


EDC (Chart: Daily Resistance: 4.80-5.00 Support: 3.90)

After slowing down for a while, EDC continued its bullish movement the previous trading days and broke the 260 day MA(green line) acting as resistance. Trading ended last April 8 with a record high in volume.

Eventhough the stock had large volume on April 8, I am having doubts if it could still sustain further upward movement this week. Looking closely at April 8, the volume was at a record high, but it did not translate into a long white candle. With such a large volume, I expected that this stock should have already zoomed past the target price, but it did not. At the very least it should have gone past the previous day’s high of 4.45, but it was also not able to move past that level. I am more inclined to believe that there might not be any further upward movement. Also when I tried to redraw the depth of the rounding bottom and taking the conservative (shorter) length, target price is at around 4.50. To be on the safe side, I would rather sell at the current price of 4.45, rather than wait for any further upward movement.

Also, watch out for island reversal formation. The stock has already formed several gaps with its rally, so there is higher possibility of an island reversal formation.