Market seen remaining cautious

Local stocks are seen to continue trading with caution this shortened trading week as investors assess how deep the current market correction will be against the backdrop of turbulent global markets.

Last week, the main-share Philippine Stock Exchange index (PSEi) gave up a total of 267.35 points or 3.24 percent to close on Friday at 7,970.80.

On Friday, the closely-tracked Dow Jones Industrial Index lost 424.69 points or 1.77 percent as jitters over a US-China trade war escalated.

“Chartwise, the week’s close at 7,970.80 signals further weakness toward the 7,500 to 7,800 levels,” said Jonathan Ravelas, chief strategist at BDO Unibank.

Any rebound, if any, might be limited to the 8,100 to 8,300 levels, he said.

Immediate support and resistance levels are seen at 7,800 and 8,100, respectively.

“As we start to see trading volume pick up, this may be an indication that we may see a selling climax soon. When this happens, we will begin to see a reversal in the coming weeks,” said Christopher Mangun, research head at Eagle Equities Inc.

With only three trading days this week, Mangun said the market would likely trade within a tighter range.

As the predominantly Christian nation observes the Holy Week, the stock market will be closed on Thursday (Maundy Thursday) and Friday (Good Friday).

Mangun said the inflation-targeting Bangko Sentral ng Pilipinas (BSP)’s decision to maintain interest rates last week came as a surprise to investors.

“We may see the market consolidate at these levels before it starts going up again,” Mangun said.

“I don’t see this market going below 7,700 and I believe we will see this market recover in the following weeks,” he added.

With some speculative issues and second-liners declining last week, Mangun said more investors were now converting to cash and liquidating positions.

“On the other hand, there is another group of investors who are taking advantage of the situation scooping up these shares at a lower price,” he said.