StockWatch (Jun 08-12, 2009): PSEi. FLI

PSEi (Chart: Daily Resistance: 2630/2770 Support: 2400)

The index is now near a couple of major resistance levels. We have 2630 and 2770 which are previous highs of the index. Of the 2 resistance levels, 2630 has more significance, because if the index is able to breach above that level, this means the index is now out of the downward trend that plagued the market since the drop which happened last Oct 2007. This indeed is something to watchout for in the days to come.

However, I think these resistance levels will give the index a hard time before it is able to move past those levels. As I have mentioned before, I believe we are in a bullish phase as evidenced by the RSI always staying above 70 while the index never goes down. And currently the RSI is now near 80 level which is considered the overbought level for a bullish scenario. The RSI being overbought coupled with the fact that the index has always moved higher every week gives more probability for a sell down or a sideways movement by this coming week or next week. I would suggest to take profits for now and wait until the index is able to move past those resistance levels.

General Analysis:

I have mentioned previously that a lot of stocks are exhibiting signs of a rounding bottom. Currently most of those stocks are already near the previous high, so watchout possible resistance on the level of the previous high. If the stock is unable to move past the previous high, then sell for the mean time.

FLI (Chart: Daily Resistance: 0.88 Support: 0.69)

FLI has recently been trading with increased volume and is about to test resistance at 0.88 which is the previous high. With the looks of the RSI being overbought, there may not be enough steam to push this stock beyond the resistance level and it may take some days before this stock is able to move past that level. Also a gap up has formed, but the stock hasn’t moved up any further, so be on the look out for a gap down which may indicate an island reversal.

This maybe a good stock to hold for the long term, but for those who are playing this stock for the short term, it would be best to sell for now.