Trading the ranges
The market was unable to breakout last week even in the face of two strong manifestations to the contrary—the market’s apparent upward direction and the possible triggering of stock plays that could propel the market to break its record highs.
When the market started the week, it was only 104.91 points off the record close of 7,392.20 and 116.36 points below its all-time session high of 7,403.65—all posted on May 15, 2013.
Taking into account the average daily rate of gains of 21.36 points the week before and the positive trading developments around the region and on Wall Street at the time, the market could have advanced by 100 points in five trading days.
Instead, it ended with a weekly loss of 25.99 points or 0.36 percent by the end of trading last Friday, settling at 7,261.30.
This also happened despite the rise in the average daily value turnover for the week to P9.62 billion or 32.69 percent up from the P7.25 billion a week ago.
The rise in value turnover and the market decline, however, will have more significant meaning when seen through the trading movements of foreign and local investors.
Foreign investors continued to be net sellers. As their investments are mostly confined within the 30-component stocks of the benchmark index, their selling activity effectively drove down the market. This is in addition to the fact that their transactions for the week fell to 47.41 percent, lower than their average year-to-date participation of 50.88 percent.
Local investors chased small-cap stocks. They stayed away from stocks of the benchmark index, further aggravating the market decline. They also radically increased total market volume from 7.67 billion shares the week before to 14.35 billion shares last week.
The following is the breakdown of the market’s performance last week: financials, down 1.52 percent; industrial, up 0.30 percent; holding firms, down 0.18 percent; property, up 2.93 percent; services, down 2.23 percent; mining and oil, down 2.27 percent, and the all-shares index, down 0.19 percent.
The ratios of gainers-losers-unchanged in the last two weeks were: 102-98-32 and 97-104-36.
Despite the market’s fall, several stocks did well for the week, giving rise to opportunities in what is called trading the ranges.
For instance, Megaworld Corp. did well last week. At the close of trading on Sept. 18, MEG’s closing price was P4.40 per share and by the end of trading last Friday, its closing price was P4.97. This meant a price appreciation of 12.95 percent in one week.
MEG traded between P5 and P5.06 a piece last week. If you were able to buy at P4.40 the week before and sold at P5 to P5.06, you would have made 13.64 to 15 percent in less than one week or a yearly return of 163.68 to 180 percent.
Another example is Robinsons Land Corp. In the last two weeks, the share price of RLC has gone up by 9.15 percent. Last week, at the closing price of P24.45, RLC’s stock price grew by another 4.71 percent.
The same is true with Energy Development Corp., a good stock to ride on for a position in the important power industry. It posted a weekly gain of 4.24 percent at the closing price of 7.62 last Friday.
Stocks in other prospective sectors like gaming also registered gains. Leisure & Resorts World Corp. (LR) share prices last week rose by as much as 9.4 percent. Total growth in the last four weeks hit 21.92 percent.
Holding firm Alliance Global Group Inc. did well, too. At its closing price of P25.85 per share last Friday, AGI shares grew further by 3.82 percent last week to bring the four-week growth rate to 5.08 percent.
Among the big losers during the week were: Boulevard Holdings Inc., down 15.20 percent; APC Group Inc., down 10.89 percent, and Max’s Group Inc., down 9.66 percent.
If you shorted or sold your investment positions on these stocks a week earlier and bought them back at their closing prices last Friday, you would have reaped equivalent gross profits. The same is true with prime telephony and data transmission stock Globe Telecom Inc. (GLO). It was down 6.46 percent at the close of trading last Friday.
(The writer is a licensed stockbroker of Eagle Equities Inc. You may reach the Market Rider at firstname.lastname@example.org , email@example.com or www.kapitaltek.com)