Early market forecast
Share prices performed strongly last week in what could be interpreted as an early sign of the market’s general trend and the investors’ expectation for the year.
Value turnover reached P23.71 billion, involving about 17.39 billion shares.
The volume and value of transaction propelled stock prices upwards in the first four trading days.
This sent the benchmark index just about 44.74 points away from the all-time high of 4,563.65, which was established in August last year.
On lower value turnover, however, the market fell lower to 4,483.36 at the close of trading last week.
The drop in the market index on Friday was blamed largely on profit taking. Investors apparently decided to pocket their gains and play it safe for the weekend as uncertainties continued to stoke the state of the global market.
Additional observations
The theory of investing on the basis of technical analysis, as especially practiced in swing (buying and selling in two to four days) and day trading, also claims that profit taking need not be triggered by external or fundamental factors, such as the one cited above, but dictated by internal aspects, such as the price dynamics of stocks at play.
Accordingly, if the price of a stock is moving up too fast in a short period of time, as what happened last week, it is likely that the stock will be subject to a sell-off because investors will be tempted to “capture or actualize” the potential gains in the stock created by the extraordinary movement of its price.
On Monday, the market was up 25.12 points, or by 0.57 percent, at 4,397.03 on a total value turnover of about P1.76 billion and total volume of 0.85 billion shares.
The following day, Tuesday, the market continued to rise to 4,422.22. Again, it was up by another 25.14 points, or 0.24 percent, with value turnover at P4.78 billion for a total volume of 3.63 billion shares.
On Wednesday, stock prices continued their climb. At the close of trading for the day, the market was up 65.55 points, or 1.48 percent, with value turnover at P5.83 billion for total volume of 3.23 billion shares.
Although the market continued its climb on Thursday, it failed to maintain its previous rate of increase.
The market experienced some price drag that the overall rise of the market was limited to only 31.19 points, or 0.69 percent.
The value turnover was bigger than the average value turnover in the previous three trading days at P6.23 billion. Also, the volume of transaction grew with 6.70 billion shares.
As a result, this reduced the average price of stocks to only P0.93 per share as compared to the first three-day average of P1.74 per share—a sign that the price dynamics at play had changed.
An additional sign that may confirm this further is that, although the market was only about 44.74 points away from the market’s all-time high of 4,563.65 on Thursday, it did not close at its session high of 4,525.21 but lower at 4,518.91.
These little changes in the price dynamics of stocks at play contributed to the market’s eventual fall on Friday, when it closed lower at 4,493.36, some 35.55 points, or 0.79 percent, down.
More observations
The observed change in the behavior of these factors may not necessarily lead to an automatic and predictable change in the trend and nature of stock prices as seemingly implied in the foregoing observations. But one thing is sure, these factors are always part of the dynamics of a stock play.
Thus, if we are to use the trending-up behavior of the market last week as a basis, our market will certainly perform better than last year.
Withstanding the uncertain outlook of the world market, this may just happen as early reports point to a better-than expected yearend results from the majority of the first 1,000 corporations of the country.
Their earnings forecasts for the short and long term are said to be reflective of the prospective outlook on the local market’s potential this year and beyond.
Also, the market’s new trading hours may help grow business and bolster market performance. The bourse has started to implement its new trading hours last week: It opens at 9:30 a.m., break for lunch at noon, resume trading at 1:30 p.m., and close for the day at 3:30 p.m.
The new schedule provides for a total of five hours of trading time. It is one and one-half hours more than the trading period when the bourse closed at 1 p.m.
This extended trading hour may lead to more business. It may also improve overall market price performance. The only question is how cost-effective it is when compared to alternative trading-hour regimens, such as when the bourse will do away with the lunch break in exchange for opening later in the morning and still operate for five hours until 3:30 p.m.
This change will not alter the market’s closing time of 3:30 p.m., which enables the bourse to still close either at the same time or even 30 minutes later than some of the stock exchanges that somehow influence the overall trend and nature of price performances in the region.
Bottom-line spin
Based on these observations, the market may hit 5,500 of the benchmark index by the end of the year. This will be about 1,000 points higher than last year’s performance.
Come to think about it, this could be a realistic market target considering the various fundamental developments that are expected to unfold in the gaming, property, mining and oil sectors within the year.
(The writer is a licensed stockbroker of Eagle Equities, Inc. You may reach the Market Rider at [email protected] or directly at www.kapitaltek.com.)
