GDP data released yesterday, along with covid-19 concerns and global stock market declines, bore on the Philippine Stock Exchange Index (PSEi) which closed the month of January 2021 at 6,612. The index fell sharply by 3.5% on Friday, January 29, 2021, shedding 6.1% from the previous week’s close of 7,045 and is down 7.4% on a year-to-date basis.

PSE Index: 6,612

Immediate Support: 6,600/6,500

Immediate Resistance: 6,740

Data from the Philippine Statistics Authority showed that the Philippines’ Gross Domestic Product (GDP) shrank by a record 9.5% in 2020, the worst since the second world war. Quarter on quarter, the fourth quarter GDP was down 8.3% (-8.3%), but higher than the -11.4% in the third quarter, and the record -16.9% in the second quarter.

The disheartening news on GDP was compounded by news of stricter quarantine measures for February in some areas of the country.

Having said that, there are only two index-stock gainers for the year so far: First Gen Corporation (+5.9%) and LT Group (+1.2%).

On the other side of the lane, double-digit losers year-to-date are Aboitiz Equities Ventures (-15.8%), JG Summit (-15.1%), Puregold Price Club, Inc. (-12.2%), Universal Robina Corporation (-11.5%), Manila Electric Company or Meralco (-10.6%), and Robinsons Land Corporation (-10.5%).

The PSE Index is now at an oversold level, with a Relative Strength Index (RSI) of 25. It is still trending down, with the 200-day simple moving average at 6,262 and the 20-day simple moving average at 7,111.

As mentioned in my last week’s post, a breakdown of the psychological 7,000 support would test the 6,740 chart support level. The index strongly breached both supports this week and is now knocking at the next psychological support level of 6,600.

If it breaches the 6.600 level, the 6,500 chart support level will be tested next. This level was an earlier resistance created on October 26, 2020. Immediate resistance is at 6,740.

Since the index is already at the oversold territory, bargain hunters might come in next week to snipe at battered index names and second-liners.