StockWatch (Oct 26-30, 2009): PSEi, BPI, SM

PSEi (Chart: Daily Resistance: Resistance: 3000/3092-3149 Support: 2915/2884)

The index bounced back from 2 consecutive days of selling. RSI did bounce from the 50 level, which means.the market is still generally bullish. Expect the continuation of the upward move next week, but do watch out for upcoming logical resistance at 3000, which I think by next week would be broken, and the standing resistance line from March at the range of 3092 to 3149. The standing resistance from March 2009 is still blocking the index’s upward progress, but I believe that this will be eventually broken by Nov and will become support by then.

BPI (Chart: Daily Resistance: 48.50 Support: 45.50)

BPI actually had a breakout at 47.50 from an ascending triangle forming from May 2009. The breakout was supported by large volume, the only problem was that it could not get past the standing resistance at 48.50. The day after the breakout, the stock went higher, but closed on the same level as the opening for that day, which indicates that there is still a lot of bearish sentiment for this stock. Then eventually the stock made a return move and price fell below the breakout line. This further confirms the weakness of the stock. Trading last Friday moved the stock above the resistance line again, but this time there was smaller volume, which indicates the upward movement is not that strong.

BPI actually has a large upward potential, you can either consider a large inverse head-and-shoulder formation or an ascending triangle formation, either way it give a great upward potential. The only problem is with the recent activity that I have explained above, it seems that it is not yet time for this stock to soar. But do watch out for this stock, especially if it breaks above the resistance line of 48.50. I believe that this could happen probably within Nov to Dec time frame.

SM (Chart: Daily Resistance:325 Support:290)

SM seems to have formed an island reversal. The stock had a sell down on Tuesday with large volume, followed by a large downward spread the next day with relatively lower volume. By Thursday, the stock gapped down and went into an indecision mode, with the stock opening and closing on the same level. This was accompanied with a very large volume. Considering the previous 2 selling days of trading, the indecision was rather a welcome sight to have. Although this may indicate indecision, this also indicates support. On the following day, Friday, the stock again gapped up with relatively large volume, which further confirms the support the previous day.

Looking at the RSI, the stock is currently oversold, and there is still a large area for upward movement. However, the MACD, suggests that this stock is bearish as it is opening downwards and below the centerline as well. So trading strategy for this stock is just to take advantage of the low RSI level and get out at the first sign of weakness. Watch out when RSI reaches near 50 level, usually when the RSI is coming from the low of RSI 30, RSI 50 is regarded as an area of resistance or rather an indicator that stock is overbought.