Stocks are in for rough sailing on near-term profit-taking this week after last week’s daily record-breaking ascent, but the firm underlying trend remains intact on the back of “strong” global factors.
Edmund C. Lee, president of Caylum Trading Institute, and Miguel Agarao, investment analyst at Wealth Securities Inc., agree the market will remain strong on “stabilizing oil prices, abundant global liquidity” and the “MSCI rebalancing.”
But the benchmark index is also seen ready to get hit by profit-taking.
AB Capital Securities Inc. said in its weekly note that the Philippine Stock Exchange index (PSEi) “is already prone to profit-taking in the near-term” as the trading volume has become thinner, while net foreign buying has declined and the Moving Average Convergence Divergence (MACD) indicator is sending out “sell signals.”
“While investors’ optimism about the pending release of corporate earnings continue to boost the market, we believe that the declining trading volume, weakening net foreign buying and the forming sell signals from the MACD indicator should pose as warnings to investors that the index is already prone to profit-taking in the near-term,” AB Capital said.
Expectations of profit-taking were based on the four-day all- time high closings the PSEi logged since Monday last week, which lifted the price-to-earnings (PE) ratio to 22.16x, according to the brokerage, noting that the psychological barrier at the 7,800 level was also breached.
The numbers show that the market is overbought, and the selling pressure may bear on the market anytime soon, the brokerage noted.
“With a lack of domestic economic catalysts, the index is expected to follow overseas leads. The biggest catalysts for next week are the continuation of the Greek-Eurozone debt talks, Fed Chair Yellen’s testimony before the House Financial Services Committee, and US’ preliminary GDP [gross domestic product]results,” AB Capital said.
The support and resistance levels are at 7,700 and 7,850, respectively, on the PSEi, it added.
For his part, Jason Escartin of F. Yap Securities Inc. said “temporary pauses are to be anticipated, as players digest also the impact of power outages on the economy and contingency measures to ensure economic growth won’t be stalled.”
He added: “Speculative shares might take the limelight, in view of the technical recovery in crude futures prices. Also, talks of possible shift to other safer havens such as metals could heighten interest for metal-related stocks.”
On Friday, the Philippine Stock Exchange index (PSEi) marked its 14th all-time high closing on the heels of a four-day rally set off by corporate earnings and an accumulation of positive news on both the local and global fronts.
The PSEi rose by 0.28 percent or 21.94 points to 7,825.39, breaching the previous all-time high closing of 7,803.45 on Wednesday, and the All Shares went up 0.14 percent or 6.30 points to 4,537.06.
The intraday high remains at 7,840.39 recorded on Thursday, February 19.