LOCAL stocks are seen to trade with bearish bias this week as investors await good entry points while sifting through other stocks in this pricey market.
Last week—the first week of the so-called ghost month—the Philippine Stock Exchange index (PSEi) added 7.24 points or 0.09 percent to close at 7,963.11 on Friday.
Based on historical data over the past five years, the PSEi dips an average 2.69 percent during the ghost month, local stockbrokerage AB Capital Securities said.
The “ghost month” is a period in the Lunar calendar when Chinese investors avoid making big-ticket investments or other big moves like getting married or moving to a new house. This period also coincides with the season when many investors from the West take long summer breaks, thus resulting in slower trading volumes. This year, the ghost month started on Aug. 3 and will last until Aug. 31.
AB Capital Securities said the PSEi might rebound this week after finding a strong support at the trough line of the uptrend. Retest area was seen at the 8,000-8,100 range.
“However, we believe that the liquidity dry-up, along with foreign outflows, may drive issue prices lower,” the brokerage said.
AB Capital Securities said the relative strength index—a technical indicator—indicated a directionless market, although momentum still favored the bulls. Primary support was seen at 7,900 while secondary support was seen at 7,700.
“For [this] week, we expect the PSEi to possibly trade lower as the technical side of the bull market waits for a seasonal ‘August’ correction toward the possible second rebound level of 7,700,” AB Capital Securities said.
Luis Gerardo Limlingan, managing director at Regina Capital, said the PSEi was likely to face more corrective pressure this week if it would fail to recover above 20-day moving average at 8,020. He noted “sell” signals already being generated by both momentum and directional indicators.
Limlingan said investors should also expect sharper intra-day movements with a moderate bearish bias this week.
“On the positive side, we think that corrections are a necessary to establish new support bases that will help sustain the index’s trend moving forward,” he said.
Regina Capital sees maximum downside for the PSEi this week at the 50-day moving average of 7,774. This being a level where buying pressure was strong, Limlingan said accumulation could be done at or near this level.
“On the other hand, breaking 20-day moving average upwards will allow rallies back to 8,100 but we are setting this as the maximum upside because overall price trend will remain in an ‘exhausted’ state,” Limlingan said. Doris Dumlao-Abadilla