StockWatch (Sep 26-30, 2011): PSEi

PSEi (Chart: Daily Resistance: 4050/3970/3870 Support: 3700)

The index had the biggest drop in a day since Oct of 2008. This floored my jaw as my hopes were shattered for the index maintaining a sideways movement.

The previous support near 4130 and the 130 and 260 day moving averages were also wiped out last week.

On hind sight, the drop is expected as the index has formed a head and shoulder formation whose neck near 4129 was broken last week. The target level for the head and shoulder formation is near 3700.

Counting the Elliott wave, we are now on the 3rd bearish wave and based on projected length of wave 3 which is 162% of the length of wave 1; this wave may reach up to the same level as the target level for the broken head and shoulder formation which is also 3700.

For the current index level at 3885, we still have way more space to drop to reach near 3700, so buckle up for further downward movement next week.

Observing the RSI, the index is now way oversold. The typical reaction to a very oversold equity is a bounce up once it goes below RSI 30. At current, RSI is now at 21, so we may also see a bounce up by next, but I don’t expect this bounce to be the 4th wave. This would probably be a short bounce with a little sideways movement.

Assuming the 3rd wave reaches the level near 3700, the 4th wave is projected to top anywhere between 3870, 3970 and 4050 (24%, 38%, 50% of the length of wave 3; Green bar on the graph).

In conclusion, we’re definitely on a bearish cycle now, so if you were stuck and wanted to get out, the 4th wave maybe the chance for you to move out of your positions. There is opportunity to profit riding the 4th wave, but for the risk averse, it would be best to continue sitting on the sidelines.

StockWatch (Sep 19-23, 2011): PSEi, NI

PSEi (Chart: Daily Resistance: 4360/4400 Support: 4260/4230)

The index’s situation slightly deteriorated last week. For the past 3 weeks the index has never gone below the standing support line of the sideways channel near 4290, but last week, the index breached that level forming a new low.

It looks like the channel might be redrawn/shifted lower, with the support near 4260 (130 day moving average) and resistance near 4360 (65 day moving average).

Trading strategy would still be the same, which is to play the possible range on certain stocks (for example DIZ) and not to hold your positions for long term.

Although the actions last week maybe a little bit discouraging, the index is still on a safe middle ground. I am just hoping that the index would be able to sustain the current sideways movement and not create a new low that is lower than the previous low of 4130 (Aug 9 low). If it does go below that level, then we may be seeing the start or confirmation of the bearish cycle.

NI- Weekly Chart

NI (Chart: Daily Resistance: 4.0/ 4.5 Support: 3.40)

NI showed a spectacular show of force Friday last week with the volume exceeding recorded volume since the start of this bullish trend for NI.

Looking at the weekly chart, we can see that the volume on the downward movement of the stock for the first 2 weeks of September is dwarfed by the volume of trades last week. This only means that the bullish sentiment for this stock is still preserved and may continue for this week.

I could not see any possible pattern to be the basis of a target price for this bullish activity, but basing on the Elliot wave pattern alone on the weekly chart, we may be on the 3rd wave. Usually the 3rd wave is the longest of all waves and measuring the length of the first wave as the minimum target price relative to the start of the 3rd wave, the 3rd wave could potentially reach at least up to 5.50.

Amidst the ranging movement of the index, this stock seems to go against general sentiment and is a viable candidate for going long. The MACD on both the weekly and daily chart seem to confirm the bullishness of this stock.

Again as with any stock, be on the lookout for dips on this stock that is accompanied by large volume (those that exceed 20M trades). If any such occurrences appear, then start unloading your position.

StockWatch (Sep 12-16, 2011): PSEi, DIZ

PSEi (Chart: Daily Resistance: 4400 Support: 4290/4250)

Just when I thought that the index is moving up beyond the current sideways channel, the index again fell within the small channel between 4400 and 4290. The recent activity only shows how volatile the market is.

As of current, the sideways channel between 4400 and 4290 still holds. There are a couple of stocks that you can play on this ranging market, but for the risk averse, it would be better to stay on the sidelines until the index is able to breach beyond the 4400 resistance line with high value turnover

DIZ (Chart: Daily Resistance: 14.40 Support: 9.80/8.40)

DIZ had a spectacular run up with large volume even going beyond the resistance line and reaching 14.40. With that kind of volume, this may definitely go way beyond the channel that it has created since July.

As of current, the stock is very much over bought. It would be prudent to lock in profits for now, probably sell ¾ of your position. This stock definitely has the potential to go beyond 14.40, but it would eventually fall back one of these days and I would rather recommend to sell now and buy later when the stock reaches near 11.50 (50% retracement).

Do not forget to observe the volume, any increase in volume on the downward movement would be a sign to cancel the idea of a buy back near 11.50.

StockWatch (Sep 5-9, 2011): PSEi, DIZ

PSEi (Chart: Daily Resistance: 4400 Support: 4350/4290)

The index is still treading the line plotted by the 65 day moving average and it seems that it has confirmed a sideways channel between 4400 and 4290.

If the index breaks out of that small sideways channel we could see the index moving back up to the previous high near 4550.

Considering the stochastics, RSI and MACD, all three are giving a higher credence to the possibility that we may be seeing some upward movement for next week.

However, I wouldn’t go long for now. I would rather go long only when the index is able to create a higher peak with no signs of bearish divergence. For now just trade the range.

DIZ (Chart: Daily Resistance: 11.76 Support: 8.10)

DIZ is an eye catcher for its long spread and large volume on the last trading day last week. There is an upward potential of up to P13 based on the resistance line connecting the previous peaks.

Buying at the current price 9.50 and selling near the previous high at 11 would already give you around 14% net profit.

This is definitely a buy but only for the short term.