Selling pressure seen

LOCAL stocks are seen to trade with downside risk this week as rich valuations may attract profit-taking alongside continuing external jitters.

During the four-day trading week last week, the Philippine Stock Exchange index (PSEi) shed 58.83 points or 0.7 percent to close on Friday at 7,771.52.

Banco de Oro Unibank chief strategist Jonathan Ravelas noted that last week, profit-taking activities dragged down prices after the market failed to test the 8,000 levels.

“High market valuations and renewed concerns arising from Brexit (Britain’s exit from the European Union) were factors to solidify gains,” he said.

“Chartwise, the week’s close below the 7,800 levels signals further weakness toward 7,500 in the near-term. This could be the much awaited breather the market has been waiting for,” he said.

If the 7,500 levels would hold, he said the PSEi could bounce back to 7,900.

“We advise traders to remain cautious this week as short-term divergences are starting to generate selling pressure on the index,” said Luis Gerardo Limlingan, managing director at local stockbrokerage Regina Capital.

Limlingan said the next trigger would be a breach of the 20-day moving average at 7,715, which could switch the trend for the week from “sideways” to “down.”  Potential corrections toward 7,600 and further to 7,570 could be possible, he added.  Doris Dumlao-Abadilla