Profit-taking seen; consolidation expected

Local stocks are seen vulnerable to profit-taking this week as last week’s bounce lacked conviction as indicated by the meager trading volume.

The Philippine Stock Exchange index (PSEi) rose by 212.47 points or 2.96 percent last week to close at 7,399.18 on Friday.

“Chartwise, the week’s close at 7,399.18 signals consolidation. The present bounce is likely not sustainable and remains vulnerable toward another attempt below the 7,000 levels,” BDO chief strategist Jonathan Ravelas said.

Last week’s bounce, Ravelas said, was due to bargain hunting activities as the market shrugged off the impact of the US-China trade war and the still rising domestic inflation environment.

Immediate support and resistance levels are seen at 7,000 and 7,500, respectively.

Meanwhile, the peso weakened for the sixth straight week last week, depreciating by 0.17 percent week-on-week to 53.51 after the government reported a wider-than-expected May trade deficit at $3.7 billion, Ravelas said.

Last week, the Trump administration proceeded with plans to impose US tariffs on additional $200 billion worth of Chinese products.

“Chartwise, the week’s close at 53.51 highlights the strong dollar trend remains. Continue to expect the currency to range within the 53.35 to 53.65 levels in the near term,” he said.

Eagle Equities head of research Christopher Mangun said the month of July was looking brighter. If the index continues with its current momentum, he said the trading gap between 7,400 and 7,500 might be filled in the following weeks.

Based on the technicals, immediate support is at 7,340 and the next resistance is at 7,500, Mangun said.