Unusual price movements

Like Wall Street, which was hit with huge losses for two straight days, our market headed lower last Friday as it was similarly hit by a selling downturn that started in the middle of the week.

The highest level that the market reached during the week was 4,363.73. This occurred on Tuesday, which became the closing index for the day, too.

Notice that the market opened on Monday at the previous week’s closing index of 4,312.96, and closed higher at 4,356.87. On Tuesday, it proceeded to open lower at 4,350.82 and hit the low of 4,337.92 on early trades. At closing time, though, the market finished at the established high for the week of 4,363.73.

Quite the opposite happened on Wednesday. Despite opening similarly lower at 4,362.23, it hit a low of 4,337.53, almost identical to that of Tuesday. The market closed lower at 4,341.62. This happened even if total transaction was 68.75 percent more than the previous day’s business.

The trading loss only involved a 0.5-percent, or 22.1-point, decline. Nevertheless, it altered the market’s direction for the week.

The explanation is found in the transaction record of the individual sectors. Profit-taking started to occur in the industrials, holdings and mining and oil sectors stocks. It was further amplified by the participation of the property sector on Thursday, when total market transaction was again more than the regular daily average at P6.57 billion.

The consecutive two-day sell-off produced what is technically called “market distribution.” This is why the market gave in to another technical sell-off on Friday, with the market’s smaller value turnover of P4.9 billion.

On a weekly basis, the overall drop in the market’s composite price index was, again, not much. The market fell only 10.53 points, or 0.24 percent, from previous. But under current market conditions, this small decline is a cause of serious worry.

In the context of how the market has been affected by, and reacting to, the unfolding events in Europe (eurozone debt crisis) and the state of the US economy, the market always become overpriced at 4,400.

Backtracking to previous periods, it was the value stocks that always encountered some form of resistance or selling pressure as they approach the 4,400 level.

Unusual

The shares of Cirtek Holdings Philippines Corp. (CHIPS) seem to buck last Friday’s general market performance on account of lingering concerns about the future of the equities market.

Upon listing last Friday, the share price of CHIPS soared past its IPO price, defying the obvious sell-down happening.

CHIPS opened at P7.90, hit a high of P8.27, fell to a low of P7.81, and closed at P7.95 a share. The value turnover equivalent of its shares reached approximately P112.60 million.

Based on its closing price, CHIPS is 13.57 percent higher than its IPO price of P7.00 a share.

CHIPS, through its two subsidiaries, has been in the semiconductor business for 25 years, providing “turnkey solutions that include package design and development, wafer probing, wafer, back grinding, assembly and packaging, and final testing of semiconductor devices.”

CHIPS raised only P295.14 million from the IPO, selling to the public about 42.16 million shares, which represented 26 percent of its total issued and outstanding shares of 162.16 million shares.

This is considerably less than the original offer size which involved the initial public offering of 61.82 million shares at an estimated price of P10.68 a share, which would have raised P660.24 million in gross proceeds.

This increase in the company’s capital, nonetheless, will allow it to access additional funding through borrowings to support long-term working capital requirements.

For 2012, CHIPS expects to realize a net income of $5 million from an estimated revenue of $50 million. This is on the basis of a yearend net income projection of $4 million and $40 million in revenue.

CHIPS was not the only stock that has been displaying unusual price movements. On the forefront is Active Alliance Inc.

With a 52-week low of P3.02 a share, AAI was on its third freeze-price and 52-week high of P69.30 a share last Friday on rumors that it would be the backdoor company of Bloomsbury Investments, the gaming company of ports magnate Enrique Razon.

Other companies with unusual price movements were Asia Amalgamated Holdings Corp., BHI Holdings Inc., Lorenzo Shipping Corp., and Concrete Aggregates Corp.

Funny or surprising, these companies claim to be as “clueless” as the general investing public about the unusual price movements of their stocks.

Bottom-line spin

In my previous article, I stated that it would still be possible for the market to make a surprise run-up similar to what some Wall Street analysts had said could happen with the S&P 500—that it could still make a stunning 14-percent rally for the year.

No doubt, our market can always ride high into the year. This is not only a possibility but a good probability. Volume of money is still significant, and foreign investment transactions continue to be substantial, as well. More than that, foreign investors remain to be net buyers.

But like what I said last time, it probably would be more practical to accept the obvious observation that the market would no longer be able to do this as unfolding global developments had kept the market unpredictable and critically volatile.

My trading strategy for the week, therefore, remains the same as last week. This is to “trade the range” and be ready to shift to “long” for, as had been said, “any point in the market can always become a turning point.”

(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.)