AFTER the local stock price barometer breached the 7,300 mark last week, the local equities market is seen attracting profit-taking this shortened trading week ahead of the long Lenten break.
Last week, the main-share Philippine Stock Exchange index (PSEi) racked up 2.93 percent to close on Friday at 7,306.74.
“The local bourse steadily climbed as global investors took on more risk amid market uncertainly declines. The (US Federal Reserve’s) Fed’s decision to keep its rate unchanged helped fuel risk,” said Banco de Oro Unibank chief strategist Jonathan Ravelas.
Chartwise, Ravelas said the week’s close at 7,306.74 would encourage further test of the 7,350-7,370 levels in the near term. “However, expect some profit taking to occur given (this) week is a short trading week,” Ravelas said.
After a two-day monetary meeting, the US Federal Open Market Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. “The stance of monetary policy remains
accommodative, thereby supporting further improvement in labor market conditions and a return to 2-percent inflation,” the US central bank said in a statement.
“The committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run,” the Fed added.
Despite closing above the 7,300 mark last Friday, Regina Capital Development Corp. managing director Luis Gerardo Limlingan said the market would likely succumb to some correction. He said the weekly uptrend was “entering overbought conditions.”
Limlingan said wider intra-day swings could emerge that, in turn, could trigger profit-taking.
“More aggressive traders may choose to hold but we advise putting tight triggers to protect gains,” Limlingan said.
Provided that the 260-day moving average holds, Limlingan said the index might rally further to 7,360-7,400 levels. However, he warned that “corrective threats are higher at those levels as RSI (relative strength index) is projected to reach highly overbought levels.”
“Though our general view on the market remains bullish, we think that range pullbacks are needed to sustain a healthy trend,” Limlingan said.
Market support is seen at 7,100 and further at 6,890. Doris Dumlao-Abadilla