StockWatch (Sept 22-26, 2008): PSEi, AC, MEG

PSEi (Chart: Weekly)

PSEi (Chart: Daily Resistance: 2470/2520/2630/2780 Support:2340/2289)

The PSE index felt the shockwave of the global sell down due to the successive bankruptcy announcements of the large US financial institutions. The index fell 200 points for two trading days and even moving way below the target price of the previously observed descending triangle. On the last trading day there was a reprieve from the sell down with the index gapping up and closing higher. This gap up formed a small island reversal pattern and even with a very good volume. The question is, now that we have an island reversal is it now the time to get in the market again? Probably if your investment objective is for the short term, I would say YES as the island reversal is a very clear indication that things will start to move the other way around. But for the long term, I would suggest to wait it out first before moving in the market, for the reason that the MACD is now below the center line suggesting a bearish outlook. Also looking at the weekly PSEi chart, we can see that the sell down that happened for the past two weeks had a very significant volume. With that large sell down volume, the index will find it a little bit harder to move past the resistances and it may take a while before investor confidence returns.

In the previous weeks, I have been pointing out a possible inverse head and shoulder formation. With the 2 week sell down, the inverse head and shoulder pattern that we are following got invalidated. But on the bright side, we may be seeing a formation of another possible reversal pattern, which is a double bottom. The sell down last week could probably have formed the second bottom of the double bottom formation. The possible neckline for this formation is at 2780. The complete formation of the possible second leg may take some time, probably around 1-2 months.

For those with short term investment objectives, watch out for resistances at 2530, 2630, 2700. Liquidate immediately if the index shows signs of weakness on those levels.

For those with long term investment objectives, watch out for the MACD moving above the centerline before getting in the market.

AC (Chart: Daily Resistance: 320/305 Support: 260/250)

AC seems to have formed a strong support line extending from July 2008. The stock bounced off from this support line,which may possibly be part of a symmetrical triangle. It is still too early for the breakout or breakdown of the symmetrical triangle, but it is worth following.

MEG (Chart: Quarterly)

MEG (Chart: Daily Resistance: 1.50/1.60 Support: 1.28)

Looks like MEG survived the market sell down with the help from the support line that extended from July 2008. This support line was tested for the third time and it has proven its strength against the recent market turmoil. Looking into the quarterly chart, it seems that this stock will be ending the third quarter with a superb performance. As we can see, the quarterly chart is displaying a white candle with a large volume, larger than the sell down volume of the previous two quarters. So what does this mean? Well in my opinion, we are seeing investor confidence going back into this stock. This is not yet conclusive, but it is a positive indicator for the stock. Given that indicator, and at the current price level, this may be a good find for those who would like to go long for this stock. Watch the small symmetrical triangle, breakout may happen within the next 2 weeks. Modest target price for the symmetrical triangle is at 2.10.

StockWatch (Aug 11-15, 2008): PSEi, DGTL, AC, MBT

PSEi (Chart: Daily Resistance: 2760/2800/2876/3019 Support: 2650/2613/2570)

The index had a very good bullish action last week. I was expecting the index to buckle to selling pressure last week as RSI is near overbought, but it kept on moving upward. A gap up also happened last week breaking the 65 day MA resistance as well as the previous high of 2650, this was accompanied by a very large volume. Although there was significant market action from the previous days, there are still a couple of resistances that the index would have to deal along the way up. An upcoming resistance level is the broken support line from an upward channel extending from 2003 (2760). Next is the 130 day MA (2800), followed by broken support neck line of the double top formation last year (2876), and last is another broken support line from a down channel (3019). Since the correction did not happen last week, expect that the correction may happen anytime within the coming week. We are currently seeing an increase in volume for the past days, hopefully this is sustained for the coming weeks so that the index may clear those resistances.

DGTL (Chart: Monthly Resistance: 1.60 Support: 1.26)

I noticed that zooming out and looking at the Monthly charts for DGTL shows a very good cup and handle formation. The handle has a resistance or breakout point at 1.60 and has a TP of 2.70. However, since we are looking at a monthly view of the chart, this break out may not happen for atleast another 1 to 3 months. For those going long, this is a good stock to get into.

AC (Chart: Daily Resistance: 320/352.50/380 Support: 305)

I never thought that AC would break the neckline of a double bottom, but it did and trading last week also saw a gap up with volume. Target price for the double bottom is at 325. The only problem that is bothering me for this stock is that there isn’t enough volume on breakout of the double bottom. Hopefully volume for the coming days would pick up. Next resistance is at 320 which is the 130 day MA then followed by 352.50 which is the previous high. Correction may happen this coming week, so for those who would like to get in this stock, this would be a good opportunity. For the next trading days, watch out as there may be a possibility of a bigger inverse H&S formation. The left should formed in between April to June, if the resistance at 352.50 holds, then this may be the formation of the neck line of the inverse head and shoulder formation.

MBT (Chart: Daily Resistance: 41 Support: 36)

The positive divergence seen previously for this stock materialized into a break from the downward channel. Aside from the break out from the downward channel, the stock also managed to move past the 65 and 130 day MA. There was sufficient volume on breakout of the channel. However, succeeding trading days where a white candle can be found has lesser volume. What I am hoping to see is more volume on white candles. Currently, the stock is overbought and there is a possibility of a correct for the coming week, this would be a great opportunity for getting into the stock. There is a possibility that an inverse head and shoulder may be forming. The left shoulder formed in between April to June. If the resistance is strong at the current level, then it is possible that we may have formed as neckline. The left should is still to be formed so watch out for this.

StockWatch (Jul 21-25, 2008): PSEi, AC

PSEi (Chart : Daily Resistance: 2507 Support: 2372)

Looks like the much awaited respite from the bearish market is starting to materialize, as we see the index finding support at 2372. The low of 2372 is still not yet confirmed as a valid trough, but as of current the index is respecting the support line formed from Jan 2008. If a trough is formed, then this is a very good sign for the index that it is now starting to stabilize. For the coming week, the index may move sideways in between the range of 2372 to 2507 level. Still there is no sign of reversal and the index is still probably in its early stage of consolidation. If you are to enter the market, keep an eye on your stops if incase the market turns sour and observe possible resistance areas or trading range when a consolidation phase is confirmed.

AC (Chart: Daily Resistance: 285 Support: 248)

AC looks as if forming a double bottom, however this is still not confirmed, not until its neckline at 275 is broken. Currently, resistance may be strong at its neckline at 285 as this was the price level of 2 gap-downs that happened for this stock. For this stock to break that level, and considering that the stock is bearish, it needs a very large volume to propel it beyond that price level. With that, I am more inclined to say that this may not materialize as a double bottom formation. This stock may have to consolidate further before moving higher. For now it is a welcome relief for this stock to be able to move sideways rather than down

StockWatch (Apr 7-11, 2008): PSEi,AC

PSEi (Chart: Daily Resistance 3050/3200 Support: 2930/2770)

The index had a continuation of the previous week’s rally with the index moving beyond 3000 level and reaching 3050 as its highest last week. If one would ask if this is a sign of better things to come, well I hope so. But what the charts are telling us at the moment is that we are still inside a bearish phase. If one would observe the RSI and MACD on the bullish phase, both RSI and MACD are oscillating above the 50 RSI level and MACD center line. As compared to what we have currently where the RSI and MACD are oscillating below those lines. It is most likely that the RSI and MACD will oscillate below those lines for a couple more weeks and hopefully this would pave the way for consolidation in preparation for another bullish phase. But ofcourse the bullish phase is still too far in the future. Another item to observe though is a probable inverse Head and Shoulder formation. With the left shoulder that formed last January and the head currently forming. Assuming that the dip in the index last March 17 is the tip of the head, we could probably guess that the head would be completely formed by near end of April. Ofcourse this is still for observation. Trading strategy would still be to stay liquid or if one would take advantage of the currently volatility in the market, trading strategy would be to hold for the short term only. We might see some dips in the index for the coming week, it would be best to protect any gains from the recent rally.

AC (Chart: Daily Resistance: 422.50/430/450 Support: 400)

AC is showing good signs of recovery from the recent downward movement. First good thing to note is that a bullish divergence can now be seen from the RSI and as well as the MACD. Second item to note is that the recent run up that happened last April 2 was able to break above the downward channel that formed since December 2007. The breakout was accompanied by good volume. For the coming week, price would probably trade between 450-382.50. As long as the price does not go back inside the downward channel, AC will still be promising. There is still no reversal area pattern formed, but watch closely as the recent low of the stock at 382.50 might be part of a double bottom formation.

StockWatch (Mar 24-28, 2008): PSEi, AC, SMPH

PSEi (Chart: Daily Resistance: 2870/3000/3200 Support: 2620)

“Wow” and “Oh no!” were the first words that I uttered when I saw the index plunge 120 points. I was expecting that trading for last week would be lethargic due to the holiday mood, but it seems that the bears were not taking a vacation and the bulls were the one’s who were out on vacation. The first day of trading last week already broke the support at 2870, that was the “Oh no!” part. The double top area pattern has come to life and the gloomy outlook for our index would be a downward target price of 1950-1820. It is also worth pointing out that the DJIA rallied 400 points up on the expected rates cut by the Fed, but sadly our index did not follow this wild ride up. The fact that the sell down was stronger than the buy up and that our index did not react very much to the DJIA’s rally further confirms the breakdown.

Looking at our index from 2003 and drawing a channel from that time frame up until now, our index is still within that channel and using that channel the next support is at 2620. If that support is also broken, then we can conclude that the bullish move from 2003 has ended.

The last trading day for the DJIA last week had an upward move. I could only speculate that our index would follow, and hopefully have a rally as most of the stocks are still very much oversold. For those who are still stuck, this would be an opportunity to get out of the market for the mean time. For those who plans on playing the rally, just make sure you would be able to react fast once the rally ends. Watch out for support-turned-resistance at 2870 and 3000. Another possible resistance is at 3200 which is the 38.2% fib retracement and 3333 which is the 50% retracement from the downward move since October last year.

Bullish Divergence?

AC and SMPH are showing signs of a bullish divergence in their RSI. AC can possibly go up to 450 while SMPH up to 9.00 just based on their previous highs. However, given the current condition of the index, one would have to be cautious in trading these stocks because even if these are showing bullish divergence, there is no guarantee that it would still be bullish once the selling momentum is started.

AC (Chart: Daily Resistance: 400/465/482 Support: 382/370)

SMPH (Chart: Daily Resistance: 8.50/9.40/10 Support: 7.50/6.50)

In Retrospect: AC

AC

AC moved with the market and went further below 457. It broke both the support line from 2002 and the 260day MA. However, thought it has moved back in an upward channel formation, the MAs hasn’t crossed each other’s path which is a sign that this stock is still bullish. Also as long as it does not go below the support line of the upward channel at around 300, this can still be considered bullish. RSI is current at 19, which very much oversold, but with the current bear market, RSI may still go further low.

StockWatch (Aug 13-17, 2007): PSEi, AC

PSEi (Chart: Daily Resistance: 3411 Support: 3242)

The PSE index, had a good run up, but was unable to sustain its upward move after reaching the 130 day MA. As of last Friday, the US market was still down, so expect further selling by Monday. Hopefully the previous low would be a strong support for our index, otherwise, we may see further move towards 3200 level.

AC (Chart: Daily Resistance: 470/477 Support: 460/457/450)

AC is in my watch list because it is now just above the 260day MA and also approaching price level at 457 which is the long term support line(see 5yr chart below) – or previous resistance line - from 2002. It’s a wait and see this week if those support levels will be able to withstand further downward market movement. If those support levels prove to be strong, it would be a good price level to buy at those levels. This stock is currently good for range trading since there is still no clear reversal from the downward move. Buy at the support level, and then sell at 510-520. If both the 260day MA and the long term support line are not able to contain further downward move, price may reach 450-430 level and possibly cause the 65day MA cross below the 130day MA.