PSEi (Chart: Daily Resistance: 4330/4440/4650 Support: 4170/4080)
The index continued its downward movement creating a very large downward gap on the second day of trading.
The support that I was expecting near 4330 which is the 65 day moving average was not able to contain the strength of the bears which resulted into further downward movement towards the 130 day moving average near 4170. Luckily, support at the level of the 130 day moving average was able to hold the bearish action from further strengthening.
The succeeding trading days saw the index bounce from the 130 day moving average and even closing the gap that was formed on Tuesday. Question is whether this incident would usher the continued upward movement for the index? Well, I believe otherwise. Even though the gap was closed, that incident is not a veritable comeback of the bulls. It was just a natural reaction to the RSI level reaching the low of 30 level. If that was a real comeback for the bulls, then the last trading day would not have formed a short real body with a very long upper shadow; preventing the index to move above the 65 day moving average. The last trading day showed that bears still have influence over the index.
For the succeeding days expect a ranging action in the market. We will be seeing a battle between bulls and bears as the index move between the 65 day (red line) and 130 day(yellow line) moving averages.
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