29 September 2011

PSEi 3,877.63. +1.51 points. +0.04%.

After gapping down at the open, the composite index formed a “frypan bottom” intraday. The pattern was mangled at the trading close by a “night attack”. Yesterday’s doji-like candle plus today’s white candle together form a “bullish engulfing pattern”. This may or may not be a valid signal, as candles are among the fastest indicators (and therefore among the most prone to false signals). Nonetheless, further confirmation such as closing above the immediate PSEi resistance, plus other technical indicators, can help validate this potential turn into another sideways or bullish phase.

Yesterday and today’s opening gaps indicate local traders continue to look to international financial markets for leads. Intraday trades, however, indicate growing dissension in opinions. This gave us our first white candle in 8 trading days.

With its steep drop and emergence of support at 0.30 in recent days, BHI has attracted a bit of attention. Looking at the daily chart, since 0.53, BHI has bulldozed through several support levels with ease. Maybe it is a downtrend, maybe it is sideways, but it does not look like a medium-term uptrend right now.

PSEi 3,885.96 resistance remains intact. It will be interesting to see how world markets will trade overnight, and if institutional investors will choose to mark the close above this short-term resistance.

Today was a mixed bag of gainers and losers on decreasing volatility. This mirrors the lack of clarity coming from Greece and Germany. Important votes lie ahead as the German parliament votes on enhancing the EFSF (European Financial Stability Facility). Also due out later today are the findings of the EU, ECB and IMF on their audit of Greece. German Chancellor Angela Merkel has expressed her desire to wait for the announcement of the audit findings before Germany decides whether to approve the additional measures or “renegotiate”.

Follow closely the German and Greek developments. If world markets follow their lead in the immediate term, there may be spillover effects into our local equities market. Then again, as today’s PSE trading has shown, actual correlation can be lower than expected.

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