The prospect of a long weekend plus a good run during the past few days should not make you wonder why we had a sell-off today. The PSEi lost 40 points as the market succumbed to profit-taking. The general trend-line is still up and what happened today is considered healthy for the market. Lately, the index has been establishing higher lows and higher highs which tells us that a good strategy to employ now is to 'buy at the dips'. Charts show us that a higher-low may rest somewhere between 3140-3150, and from there, the market can resume its journey up.
Then again, keep your guard up. If 3140 support is pierced then we can be moving sideways or that can even herald the start of a correction. Nevertheless, any correction that will occur from this time on should be viewed as a buying opportunity.
Keep a decent holding of cash this april. I have this feeling that a short correction will come upon us before the dreaded May elections.
Until the next trading day... have a holy Holy Week!
It's been another thin volume trading day at the PSE with volume staying just a little over a million shares traded for the day. The action overnight at Wall Street provided some guide on where the PSE headed today.
The index's key resistance level at 3200 is now breached and from this platform the market will now decide if it still wants to go up or undergo a correction (which I estimate to have a 50:50 odds). The level of 3200 now means that our index is just about 5-6% off its all time high last 2007. And that will be the next level of resistance (3350-3400).
Tomorrow's trading can go both ways. You can take profits ahead of a long vacation. Or you can increase your positions anticipating a good earnings season by next week.
Regarding the risk of a correction, I turn to the VIX for clues. The CBOE VIX is still at complacent levels (below 20). While a lot would look at this as a sign of generally 'calm' markets, I see this as a clue of the market's waning libido and could be the precedent to a short term sell-off or correction (when the VIX hits below 16?). And a sell-off in the US would eventually translate to the same course locally.
Again, another flat day for the Philippine market. Volume has been thin as well. The market has been trading on the sub-1 million shares for a few days now and this can be due to the upcoming long vacation. I believe that the market will now consolidate between 3100 and 3150 within the next 10 trading days with resistance being set at the 3200 level.
The 3200 resistance is important since at this level, we are just around 5% shy of the PSEI's all time high of above 3400 that was registered during the 3rd quarter of 2007.
Traders might also want to cash in to lock in some gains before the close on wednesday as there will be much uncertainty during the very long weekend.
My personal picks right now include JGS and URC. They have made a good run but are still dirt cheap. URC is still trading around 10x future earnings while JGS is still at 8x earnings. I'm overweight with Gokongwei stocks right now and will try to pare down in the next few weeks
PNB is also starting to make a move. This is a classic Buffet stock which is presently waaaaay undervalued. With my last computations, I think that this is trading about half it's book and fair value.
The sleeping giant, BPI, well.... it's still sleeping. But the improvement in the over-all economic picture should benefit BPI which I would expect to move sideways (46-48) until the week after easter. However, the dividend ex-date announcement may just prove to be the jolt to end the slumber.
Trans-asia oil (TA) is taking a breather and this might be a good time to accumulate the stock. At the present price it is still trading at around 6-8x future earnings, and should benefit from the rise in oil prices.
