StockWatch (May 30-Jun 03, 2011): PSEi

PSEi (Chart: Daily Resistance: 4340 Support: 4170)

The index continued to move downward at the start of last week, but was able to recoup losses on the last 2 trading days.

A question of whether this is already the continuation of the upward trend is still unanswered until it is able to break above previous high of 4340. As of current the pattern we are seeing now is a sideways movement trading between 4170 and 4340.

Most of the positive stocks last week were the index stocks and in general most of the other stocks did not react well to the 2 day index run. So for next week, keeping liquid is still best, but for those who would like to take advantage of the ranging action, it would be best to play only a small portion of your portfolio.

StockWatch (May 23-27, 2011):PSEi

PSEi (Chart: Daily Resistance: 4340 Support: 4260/4220)

The index just moved sideways last week, but the movement is marred with a lot of sell down action.

As I mentioned last week there is a potential for the index to form a double top or a head-and-shoulder formation. What I forgot to consider is that there is also a potential for the index to form a bullish ascending triangle. However, we are still to see higher lows to be formed for the ascending triangle. If the index continued to move lower towards 4200, this would somehow eliminate the possibility of the ascending triangle, giving more possibility for the double top or head-and-shoulder formation.

There is still no indication from either the stochastic or MACD that any bullish action is imminent, so continue to be liquid until we are able to see positive improvements on the index.

StockWatch (May 16-20, 2011): PSEi

PSEi Weekly

PSEi (Chart: Daily Resistance: 4340 Support:4180/4200/4050/4000)

The index bounced back from the low of RSI 50 and had a short 3 day run-up to retrace its previous support-turned-resistance line. The last 2 trading days shows us a not so good sign as the last 2 days had sell downs accompanied with larger value turnover relative to the first 3 days of trading. A negative/bearish divergence can also be seen between the RSI and the index, where the index rallied higher but failed to create a higher peak for the RSI. Expect that by next week, this bearishness would continue.

Looking at the daily chart, it looks like either a double top or a head-and-shoulder formation is starting to emerge from the picture. Either way, its neckline and support is around the level of 4180-4200. If the index moves lower than that support level, this might be a confirmation of the double top or head and shoulder formation, both of which has a target level of around 4050-4000.

Although the double top or head-and-shoulder formations on the daily chart are bearish formations, there is a possibility that this could be a blessing in disguise. Looking at weekly chart, we can see that an inverse head-and-shoulder formation is also starting to emerge. If the breakdown of the double-top/head-and-shoulder formation on the daily chart does materialize, this may contribute to the weekly chart forming the right shoulder of the inverse head-and-shoulder formation, giving higher possibility for the continuation of the upward trend since last year. The formation of the right shoulder on the weekly chart would take anywhere from 2-4 weeks to materialize so don’t bet yet on this happening immediately. For the coming weeks it would be best to keep liquid and watch for buying opportunities near support level of 4050-4000.

StockWatch (May 9-13, 2011): PSEi, CEB

PSEi (Chart: Daily Resistance: 4340 Support: 4170/4150)

Looks like the bears won on the standing sideways movement of the index. The sell down brought the index lower by around 100 points.

Although the sell down made a considerable effect on the index, there seems to be a light on this gloomy scenario. Trading last Friday saw the index creating a hammer formation. This means there was a considerable pull back effort made by the bulls preventing the index from slipping lower. Also considering the channel created during the sideways movement of the index, the sell down last week broke the support line of the channel but the target level of the break down was already reached last Friday. In addition to this, coming from an RSI of above 70, support is usually found when RSI reaches 50. All of these signs are pointing to a possible pull back by next week. The question of whether this pull back would be a continuation of the upward trend is still unknown, but at the very least, if you got stuck with your position, there is a chance for you to sell by next week.

CEB Chart: Daily Resistance: 94.50/100/105 Support: 89.10)

CEB had a bullish run last week creating large spread on the white candles accompanied by increasing volume. This is definitely a unique showcase of strength considering that the market in general was down most of the days last week.

As of current, the stock is exhibiting signs of a pennant formation and a break out that happened last Friday. This break out has a target price of around 105. However, there is a strong resistance at 100.

Watch out for signs of divergence as the stock goes up.

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.