StockWatch (May 2-6, 2011): PSEi, FGEN

PSEi (Chart: Daily Resistance: 4340/4400 Support: 4170/4060)

For last week we were observing if the bullish actions last April 20 would be supported by a follow through in bullishness by Monday April 25. The index did indeed create a significant white candle spread on Monday, but the value turnover was not as expected to ensure a bullish run. It was a mixed trading action where one day’s action is countered by another day’s action as seen by the interlacing white and black candles with varying value turnover. The lack of follow through by the index actually gives a higher possibility of a near major bearish action. As with last week, we have observed a negative divergence between the RSI and the index and within the week, another negative signal has been added with the MACD crossing below the signal line. So we are seeing more negative signals as the index moves sideways, which is definitely something we should keenly observe. I would suggest selling portions of your position for now to lessen your exposure in case a major bearish move happens. If more negative signals pops out, then the popular adage “Sell in May and go away” might come true.

FGEN (Chart: Daily Resistance: 14.86 Support: 13.80)

FGEN has had a good run up since early March. All of the bullish trading days have been accompanied with large volume giving support to the bullish ascent. However for last week, we are starting to see some negative signs that this run up is near its end.

One of the negative sign is the volume on the black candles. We are starting to see increasing volume on the days when black candles were formed for last week. In line with that, on almost all cases since the run up from March, volume on black candles are usually lower than white candles that comes after it, which means that the negative action was countered by bullish actions the following day, accompanied with larger volume. This time around, looking at the trading for the last 2 days, the black candle formed last Thursday was accompanied with an increasing volume compared to the black candle volume last Tuesday. But the negative action last Thursday that was countered by bullish actions on Friday did not surpass or even match the volume of the black candle that preceded it. This is definitely a first sign of weakness.

Another negative sign is the negative divergence between the RSI and the stock. The stock has been moving higher for the past 3 weeks, but the RSI has not gained a higher high.

Although the stock still has the potential to move higher, I believe it might not be able to move higher than 15 if the stock continued to lose volume on bullish days.

For next week, observe the volume accompanied by next week’s trading. If the volume on black candle days increases while volume on white candle days decreases, start selling your position.

StockWatch (Apr 25-29, 2011): PSEi, MPI

PSEi (Chart: Daily Resistance: 4300/4400 Support:4160/4060)

The index has been moving sideways for the past 3 weeks and the resistance near 4300 is still holding its position. Question on whether the index would also be able to hold its position alongside the resistance line is still unanswered as the chart is giving us mixed signals.

Looking at the RSI it has recently been creating lower highs from the previous overbought level at 78 while the index is creating higher highs. This is a common sign of a negative divergence between the index and RSI which is a bearish indicator. This bearish sign was also accompanied by decreasing value turnover, further strengthening the idea that the index is losing steam. However, trading last Wed saw a higher than usual value turnover that accompanied the white candle, which is a bullish sign (This is probably due to the bullish trading in the mining sector).

Trading by Monday would give us a picture where the index would be moving for the coming week. If the trading last Wed would hold water, then by Monday alone, we can immediately see a follow through in bullish trading. Otherwise, if follow through does not happen immediately, then it’s back to sideways movement giving a higher possibility that the index would succumb to the bearish indicators.

MPI (Chart: Daily Resistance: 3.90/4.00/4.40 Support: 3.70)

MPI has been moving bullishly over the past 4 weeks and it looks like this stock may be nearing a point where it loses its upward momentum because of an upcoming resistance at 3.90 (which is a point in the resistance line connecting the peaks from Nov 3, 2010 and Jan 4, 2011) and 4.00 (which is a logical resistance). Aside from the resistance line, the stock is now in the overbought level. Also looking at the volume for the past 2 trading days where a white candle has been created, the volume is way below the average volume. All of these are pointing to a possible slowdown of the bullish advance.

I would advise to sell a portion of your position for the mean time as I do not see that this stock will still be able to sustain further upward movement. At best it would probably start to move sideways for short while between the 65 day moving average (orange line) 3.70 and the resistance line at 3.90. The stock still has the potential to move up to 4.40, but it needs to regain momentum (more volume on the upward movements) and with the possible sideways movement for this stock, this means 4.40 would not be reachable in the very near future.

StockWatch (Apr 11-15, 2011): PSEi, NI

PSEi (Chart: Daily Resistance: 4241/4300/4413 Support: 4053)

The index lost a little bit of steam on the upward movement, with the index moving sideways last week. This can be attributed probably to the overbought situation of the index.

For the coming week, expect further sideways to downward movement for the index. Any downward movement is considered healthy for the index as long as it does not move below the 130 day moving average at 4053.

A lot of stocks that have been moving up the previous 2 weeks are now overbought. It would probably be better to lessen your position for now and sell a portion while the stock is still trading high. As long as the upward trend in a stock is intact, you can still hold on to your remaining portion, otherwise sell when the upward trend is broken.

NI- Weekly Chart

NI (Chart: Daily Resistance: 2.50 /2.72/2.90 Support: 2.23)

This might probably be the reversal that we are waiting for NI. On the first trading day last week NI formed a white candle with 6M trades which is nearly a complete turnaround from the trading on Friday the previous week (April 1) where a black candle was created with 7M trades.

Trading volume on days when sell down happened is low and trading last week was peppered with instances where opening is near closing value of the stock. So what we have here is definitely a reversal from the downward trend, but there seems to be a lot of indecision on the upward movement.

Looking at the weekly chart, we can see that the white candle formed for last week had a very significant amount of volume 15M trades compared to the previous week’s 18M trade.

The daily and weekly chart are both displaying a reversal action. However, we want to see a follow through on this reversal. I am hoping that the follow through action would happen this week, otherwise, it would be a sideways movement for this stock and definitely momentum would fizzle out.

StockWatch (Apr 04-08, 2011): PSEi, NI

PSEi (Chart: Daily Resistance: 4130/4240/4340/4413 Support: 3930)

The index made a very surprising move last week and gained more than 200 points in a span of 3 trading days all accompanied with high value turnover.

Now we have a confirmed break out from the existing downward channel from Nov 2010. This means we are out of the downward trend and is starting to retrace back to the previous high of 4413. The possible target level for the breakout is near 4340.

Amazingly, the bullish action last week not only broke the downward channel but also broke the 65 day and 130 moving average, as well as some standing resistance lines.

For the coming week expect a little bit of selling to occur as the RSI is on the overbought level. As long as the index stays above the 130 day and 65 day moving averages, it is still safe to hold on to your positions.

NI (Chart: Daily Resistance: 3.00 Support: 2.23)

NI seems to be the stock you’d have to avoid looking only at how red the stock’s chart is as of current. However, even if NI is on the bearish side, there is a looming opportunity for a quick profit for this stock.

Looking at the stock’s RSI, we can see that it is way below oversold level, currently at 16.61. The previous instance when the RSI reached that low was on Dec 16, 2010 and a quick 50% rebound was made by the stock.

Is there a possibility that the same thing could happen again for this stock? Yes! The only problem is when that will come. It is still not recommended to buy at the moment since what we thought of low today might be lower on the following day. We are not sure whether the current price is the lowest since the stock has been constantly on the downward move and has stayed in the oversold level for a long time. However, we should be on the lookout for reversal indicators such as a cross followed by a white candle with the volume of the candle having at least 5 million units traded. If such a thing happens, expect the price to move upward up to 3.00 which is near the 65 day moving average giving you around 30% net profit from the current price.