Weak trading seen

LOCAL stocks are seen to continue trading with caution this week as expectations of a dovish US Federal Reserve may be negated by jitters over the newly declared “state of lawlessness” triggered by a bomb attack in Davao.

The Philippine Stock Exchange index (PSEi) ended on Friday at 7,807.42, down 38.07 points or 0.5 percent for the week. The local stock barometer has been weakening for the last four weeks.

Stock dealers said the market’s knee-jerk reaction after the Davao blast would be to sell equities.

On the other hand, the closely watched US nonfarm payrolls added 151,000 jobs in August, slower than expectations, which thus scaled back earlier expectations that the US Fed might raise interest rates this month.

“The first two trading days will be crucial for the index as it needs to sustain its hold above 7,800 to prevent another round of correction back to its 100-day moving average. However, given its overall bearish signals, our trend bias this week remains highly bearish unless prices

rally above 65-day moving average (currently at 7,840) with volume support,” said Luis Gerardo Limlingan, managing director at Regina Capital Development.

Volatility is becoming another concern as the 14-day average true range (ATR) was starting to pick up, which meant moderate to heavy intraday movements could be expected, Limlingan said.

“We recommend a cautious buying strategy, especially for issues that have already reached oversold conditions. Issues stabilizing at their respective support bases are good buys for the week while we advise avoiding issues that are currently trading in a strong downtrend,” Limlingan said. Doris Dumlao-Abadilla