Market seen to test 7,800 levels

The local stock market may test the 7,800 levels in the near term but is increasingly becoming vulnerable to profit-taking after the four-day run-up last week.

Last week, the Philippine Stock Exchange index (PSEi) racked up 301.77 points or 4.08 percent to close at 7,701.38.

“Chartwise, the week’s close at 7,701.38 encourages further tests toward the 7,800 levels in the near term,” BDO Unibank chief strategist Jonathan Ravelas said.

Ravelas sees the PSEi’s immediate support and resistance levels at 7,000 and 7,800, respectively.

The recent surge is seen as just a technical rebound following the market’s reversal from bull to bear territory. The PSEi will have to break 8,308 to put bulls back into play, he said.
Eagle Equities head of research Christopher Mangun said that based on technical readings, there should have been a pullback on Friday, when the PSEi was down by almost 80 points before a last-minute surge in buying that brought the index to a positive close at the final trading day for the week.

Mangun also noted that value turnover had started to pick up, with P28.12 billion worth of trades for the week.

“The PSEi is currently up 7 percent for the month. With 2 days left of trading in July, I will not be surprised if we will see a pullback at the beginning of [this] week. This was the pullback that was delayed from last week. The index cannot continue to maintain this momentum without relieving some pressure,” Mangun said.

Historically, during the month of August or “ghost month,” the index would either stay flat or end the month down as Chinese investors stay on the sidelines, Mangun said.

“This year is a very different situation as the index has bottomed out in July. The index has just broken above the strong resistance at 7,500 and we shall see if this will get investors back into the market regardless of the ghost month,” he said.

The “ghost month”—the seventh month in the Lunar calendar when it is said the gate of hell is wide open and ghosts come out— is a period when Chinese investors avoid making big-ticket investments. Trading volumes are usually thinner during this period, which coincides with the peak of summer holiday in the West.

This year, the ghost month begins on Aug. 11 through Sept. 9.