Profit-taking seen in slow trade this week

The bulls are seen to take a break this week on technical correction while the shortened trading period this Lenten week will put some domestic players on holiday mode.

There will be only three trading days this week. The market will be closed on Thursday (Maundy Thursday) and Friday (Good Friday). As many investors typically go on a holiday break, trading volume typically declines during the Holy Week.

Last week, the Philippine Stock Exchange index (PSEi) broke out of its consolidation phase, rallying by 3.72 percent to end on Friday at 7,583.75. This was after Economic Planning Secretary Ernesto Pernia expressed optimism that the country’s first-quarter economic growth could hit close to 7 percent, which will bode well for corporate earnings.

A breakout was achieved on April 4 when the PSEi rose past the resistance at 7,400.

“Chartwise, the week’s close at 7,583.75 signals that a breakout is underway after a more than three-month consolidation,” BDO Unibank chief strategist Jonathan Ravelas said. “Look for further tests toward the 7,700 levels. Continue to see the market to range between 7,400–7,800 levels in the week ahead,” he said.

Last week, the PSEi hit a new year-high of 7,667.33. Ravelas said this was supported by foreign portfolio flows amounting to $166.7 million so far this month.

In the first quarter, the stock market saw net foreign outflow estimated at $300 million.

Joseph Roxas, president of Eagle Equities Inc., said the PSEi might see some correction. However, he said overall sentiment remained positive after last week’s breakout.

“It’s just a natural correction,” he said.

Meanwhille, Ravelas noted that the local currency had strengthened by 0.16 percent week-on-week for the second straight week as equity portfolio flows trickled back to the local equity market. This was also evident in other countries in the region like India, Indonesia and Thailand, he said.

“Chartwise, the week’s close at 50.08 [to a dollar] still highlights a strong support lies at the 50–50.10 levels. A break below the 50 levels signals further tests toward the 49.70–49.80 levels and will confirm a near-term top at 50.40,” Ravelas said.

“Continue to see the currency to range between 50– 50.25 levels in the week ahead,” he said.