Local stocks are seen to trade with an upward bias this week in an attempt to build a base above 6,500, riding on dovish remarks from the US Federal Reserve and expectations of buoyant second-quarter Philippine corporate results.
Last week, the main-share Philippine Stock Exchange index (PSEi) gained 73.73 points. or 1.13 percent to close at 6,574.21 on the back of US Fed Chair Ben Bernanke’s stance that monetary stimulus would be sustained and a growth outlook upgrade by the International Monetary Fund on the Philippines.
“Chart-wise, expect the market to consolidate between the 6,250-6,750 levels in the week ahead. A test at 6,750 may occur and if broken, may test the 7,000 level,” said Banco de Oro Unibank chief strategist Jonathan Ravelas. He sees the 6,750 level as the barrier that must be breached to bring the bulls back to play in the local stock market.
Abbygayle Estrella, an analyst at AB Capital Securities, said a sideways movements was still a possibility this week as the index seeks domestic leads.
“Local shares could have their fair share of gains on the sights of the upcoming second-quarter earnings report and optimism on the fourth State-of-the-Nation Address of President Aquino,” Estrella said.
AB Capital Securities sees support for the PSEi at 6,300 alongside another week’s attempt of breaking the 6,600 resistance. If breached, she said this would lead to the next cap of 6,800.
“We advise investors to take advantage of short-term rallies to realize profits ahead of the market’s lethargic activity during the Chinese ghost month (Aug. 7 to Sept. 4),” Estrella said.
She said AB Capital Securities’ top stock picks at this point are EEI Corp., Metropolitan Bank and Trust Co. and San Miguel Pure Foods Co. Inc.
For the month of July, Estrella noted that the main index was bounded within the 6,200-6,600 levels.
“Despite a remarkable 2.6 percent gain on Friday, the PSEi peaked only at 6,593.58 and is unable to pierce the 6,600 threshold. As the relative strength index still points toward a positive bias, the recent close of the PSEi crosses the 23.6 percent Fibonnaci retracement level of the 3,880-7,405 range,” she said.
Assuming that the rally will continue, she said this would bolster the main index toward the new resistance at 6,880, which should be coupled with significant volume. Doris C. Dumlao