StockWatch (Mar 12-16, 2012) : PSEi (Hanging man on PSEi Weekly Chart)

 PSEi Weekly Chart

PSEi (Chart: Daily Resistance: 5040/5090 Support: 4960)

The index is still following the upward channel that was established since Jan of this year.  The good thing is that the market is a little bit predictable because it is following a channel pattern.  But the bad news is that the index is still creating more negative divergence as the index creates new highs.

The new negative divergence is again visible in RSI, MACD and Stochastics, with the index moving higher, but those indicators are moving lower.

Aside from the negative divergence, it seems also that there is relatively lesser value turnover compared to value turnovers for the past month, which means lesser money is being played in the market.

Looking at the weekly chart, we can see that there is now a hanging man formation. A hanging man formation is a bearish indicator and is usually seen on upward trends. This usually marks the top of the trend.  However, a hanging man still needs to be validated by further indicators.

For next week, for the risk averse, I would suggest that you stay on the sidelines for now. There are lots of negative indicators being displayed in the chart and if you are not quick enough to react, this may cost you.   For those who still would want to ride the market, I would suggest that you religiously observe the current resistance and support levels of the upward channel.

StockWatch (Mar 05 – 09): PSEi

PSEi(Chart: Daily Resistance: 5090 Support: 4900)

The index dropped 100 points on the first trading day last week, but proved to be non deterrent for bullish traders who pushed the index from the low of 4790 up and beyond the 5000 level ending at 5016.

From the chart, the index was able to get back inside an upward channel with resistance near 5090 and support near 4900. We have to wait and see if the index is able to move above the resistance line.

If you got in the market again last week, I would recommend going back in a range trading strategy, but as of the moment hold off the buying as the index is near the resistance line and then start selling when the index nears the resistance near 5090.

I would also suggest to appropriate lesser portion in trading. I still see that there is imminent danger, considering that the index is moving higher but the MACD, RSI and Stochastics are generally moving lower.   Be on the watch for negative divergence when the index reaches resistance near 5090.