PH SHARES WEEKLY OUTLOOK

Bears remain wary of yuan, ‘ghost month’

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IT looks like the market is in for another week decline as the bears remain wary of the impact of the yuan devaluation, particularly because the ‘ghost month’ has begun.

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BPI Asset Management expects to see a rating range somewhere between 7,300 and 7,400 on the benchmark PSEi “…with a downward bias as the negative sentiment from the devaluation of the renminbi persists.”

“The OFW [overseas Filipino workers]remittances data are expected to come out next week which could provide support… if it surprises on the upside,” it added.

A “long-term bearish trend is also stirring” as technical indicators point to a “death cross” which happens when 50-day moving average (MA) crosses below the 200-day MA—a “rare” occurrence with the latest phenomenon being the third in the last seven years, said Justino Calaycay Jr., equity analyst at Accord Capital Equities Inc.

“Meanwhile, the second quarter earnings cycle comes to a close with nothing to lift the veil of doubt that has covered the once-seemingly unquestioned optimistic outlook,” Calaycay noted.

“The market’s consciousness will also be blanketed by the traditionally weak period that encompasses the Chinese Ghost Month and the Western hemisphere summer season. Short of being rudderless, we can fairly expect the market to keep to a sideways bias,” he added.

Expect “wider pullbacks” toward 7,272 support level in the next few days as “weaker signals and recent support breaks last week put a downward pressure on prices,” said Luis Limlingan, research head at Regina Capital Development Corp.

“Lightening up or taking profits on trading positions is advised, and then wait for a support bounce before entering a range buy. Note that this expected test of the support level will be crucial because trend reversals usually happen during the formation of a third reaction high or low,” Limlingan noted.

The resistance levels remain within the 100-day moving average between 7,600 and 7,700, which has kept the index from reversing upwards and instead kept to a range-bound primary trend, he added.

The Philippine Stock Exchange index (PSEi) has dipped three times below its 200-day MA. Because of such dips, the market is showing signs of a possible reversal from the current support area due to some buying activity. As a result, share prices may start to stabilize, Jason Escartin, investment analyst at F. Yap Securities Inc.

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