THE STOCK market is seen continuing to trade with caution this week as the market awaits developments in Greek debt negotiations and China’s volatile asset markets.
Last week, the Philippine Stock Exchange index (PSEi) lost 142.71 points or 1.89 percent to close at 7,392.59.
AB Capital Securities said this week would be a critical period due to a slew of economic data and news releases.
During the weekend, euro zone finance ministers and European leaders were set to assess the reform proposals submitted by the Greece government while China is set to announce its second-quarter gross domestic product on Tuesday. “This will prove to be pivotal amid the volatile Chinese equities market as a slowdown may reverse the potential rebound which started Thursday,” AB Capital said.
In terms of technicals, as the index managed to rebound from the key support at 7,300, AB Capital noted that stochastics were now showing reversal signals, suggesting that a short-term run-up of up to 7,600 could be expected.
Jonathan Ravelas, chief strategist at Banco de Oro Unibank, noted that the index had broken past the critical support of 7,500 and fallen to as low as 7,239.02 before attracting bargain-hunting.
“Immediate support now lies at the 7,200 mark,” Ravelas said. “Should that level hold, expect the index to bounce back to the 7,500 levels. However, key risk still lies at 7000.”
DA Market Securities said the PSEi remained firmly within a downtrend, having broken the 7,380 support and now pointing to a retest of the recent low of 7,272, which would mark a 12.5-percent correction from the all-time high of 8,136 hit in April.
“The next move of the PSEi will be pivotal as it would determine whether the index will establish a base of support by holding nearby recent low or even register a higher low. On the other hand, a lower low would lead to a continued bearish stance, opening the possibility of testing next lower supports at 7,200 or 7,000,” it said.
But DA Market said 7,000 was a formidable five-year chart trend support level, which if broken would lead to a test of 6,780 or a 20-percent retracement from the all-time high. Doris Dumlao-Abadilla