StockWatch (Jun 25-29, 2012): PSEi, MEG

 PSEi (Chart: Daily      Resistance: 5156         Support: 4964)

Events from last week’s trading was positive, with the index regaining its loses from the previous week. 

We can now see a possible slight upward shift in the sideways movement of the index as it was able to create a new high since the major downward trend that happened last May.  Albeit slightly upward, this is still a sideways movement for the index ranging between approximately 5156 and 4964.

There are no negative divergences that can be seen from the chart; both MACD and RSI are in-synch with the movement of the index.

The index has now established a pattern, that of a sideways movement, and it is currently following resistances and support areas.  So for the coming weeks, range trading strategy is recommended.

MEG (Chart: Daily     Resistance: 2.26          Support: 1.90)

MEG caught my attention because of a very noticeable volume and price pattern.  The ongoing trading action for MEG seems to be forming a cup and handle formation, with volume increasing as the right side of the cup is being formed.  

With the inability of the stock to support further upward movement last Friday, this may signal the start of the handle formation.

Generally a cup and handle formation is a bullish continuation pattern. Considering the recent upward trading activity in MEG since the start of the year, we may be seeing the return of MEG towards the previous high created last Nov 2010.   However, there are still a lot of resistance levels that it needs to overcome, but nonetheless, MEG is slowly knocking out one level at a time.

If the cup and handle formation does materialize, it has a potential upward target price of 2.55, slightly just above another resistance level at 2.48.

StockWatch (Jun 18-22, 2012) PSEi

 PSEi  Weekly Chart

PSEi (Chart: Daily      Resistance: 5109         Support: 4929/4909)

Apologies if I haven’t been posting any analysis on the blog for a month. I was on a month long job assignment outside of the country and I wasn’t able to monitor the local stock market.

I was surprised that a lot has happened for a month, particularly with the index falling 400 points on May and more recently the 200 point drop from last week’s trading.

A lot may be wondering where the index is headed, and from the looks of the daily chart, the index is still in a sideways movement between 5109 and 4909.   With the RSI chart, we can see that the index is definitely undecided where to go as seen by the zigzagging action, crossing above and below the 50 RSI level for 3 weeks now.

However, looking at the weekly chart, particularly the MACD opening wide downward, the index is more likely to move lower in the long term, so it is possible that what we are seeing now is just a pause before the continuation of the downward movement.

For next week, if the index continues to move lower than the support line at 4909, then this would be a breakdown of the current sideways channel. Target level for this would be near 4700.   I would suggest staying on the sidelines for the mean time until at least the MACD has crossed above the center line again.

StockWatch (Apr 16-20, 2012): PSEi

PSEi (Chart: Daily      Resistance: 5100         Support: 4980)

The index is now starting to form a downward trend.   We can see from the chart that the index has bounced off from a new support line which is part of the downward channel.

The last two trading days of last week created white candles but it still remains to be seen if the index can move above the resistance line near 5100.   If it does move above that level, it is a welcome move for the index. However, if it is unable to move above the resistance line, then it confirms the strength of the newly formed downward trend.

Do observe the RSI, lately the index has been respecting the significant levels of the RSI, particularly the 50 and 70 level. Since early Feb of this year, the RSI has been moving between 70 and 50 level.  Every time the RSI hits 70, it starts to go down, and does the opposite when it hits 50 level.  Right now RSI is moving towards 70 level, so expect a possible reversal when it hits near 70. 

StockWatch(Apr 09-13, 2012) : PSEi, MEG

 PSEi – Weekly Chart

 PSEi (Chart: Daily Resistance: 5146 Support: 4920/4600)

The index seems unable to move further upward since the highest recorded level at 5146.  Since then, the index has been sluggishly moving in small increments at a time compared to previous weeks.  We may be seeing a slowing down of the index and for the coming weeks, with the index moving sideways to downwards.

The MACD is now opening wide downwards, which is a bearish indicator. MACD seems to be pointing to the possibility that the index’s sluggishness and inability to move higher may be the starting point of the downward movement of the index.  The MACD on the weekly chart seems to support this idea as the MACD is now starting to move closer to the signal line.  

If the index starts to move downward, the next support would be near 4920, which is the level of the 50 day moving average. Should the index move further down from this level, next support would be near 4600 which is the 38.2% Fibonacci retrace from the start of the index’s rise from Sep 2011 up to the index’s highest in Mar 2012.

MEG (Chart: Daily Resistance: 2.10 Support: 1.96)

MEG recently had a milestone improvement. The standing resistance line from more than a year of downward trend was broken last Mar 12, but the problem then was that there was no volume on the breakout event and so the stock price fell down below the previous resistance line.

On the next breakout event though, things have changed. The stock steadily rose to a new high for the year at 2.10 accompanied with significant volume on every step of the way.  This confirms that this stock is now again the in the buy list of traders.

The recent downward movement last week was a healthy correction and we can see that 1.96 seems to be a strong support for this stock in the recent trading.

Trading for next week would confirm the strength of this stock if it continues to move upward.  If it does move upward next week, I can say that this stock would be a good stock to hold if you need a stock to park a portion of your money for the long haul. It has the potential of moving up towards its previous high near 2.84 which is near 50% profit.   Its short term target price would be near 2.25

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.