Stock Market Outlook (Technical): The Philippine Stock Exchange Index, status and technical outlook, as of March 05, 2021.
The Philippine Stock Exchange Index (PSEi) closed flat on Friday at 6,881, losing a mere point from Thursday’s close of 6,882.
As what can be expected from such a flat close, sector indices were mixed – the financials, services, and property sectors posted gains while the industrial, holding firms, and mining & oil sectors all closed in red.
Week-on-week, the local stock barometer is up 1.3%, gaining 86 points from the previous week’s close of 6,795. On a year-to-date basis though, the PSEi has shed 258 points, down 3.6% from last year’s close of 7,139.
Relative Strength Index (RSI) is currently at 46.75, which is slightly in the sell area.
The 50-day moving average is at 7,035 and is still well above Friday’s closing of 6,881.
The index has formed a symmetrical triangle formation, which indicates a listless market that has not decided where to go. The immediate support formed by the triangle is at 6,750 while the immediate resistance is at 6,900. Either a breakout (resistance is breached) or a breakdown (support is breached) can happen in the next few days or weeks.
Market Outlook: Beware the Ides of March
So goes the saying but the Ides of March can either be good or bad. It used to be the start of new year, which means festivals and celebration. It however turned out a new meaning when Julius Caesar was assassinated on that unlucky Ides (15th day) of March.
Similarly, a symmetrical triangle could either be good or bad. In Technical Analysis, a symmetrical triangle is a neither-bearish-nor-bullish chart pattern formed by drawing a downward trend line that connects a series of lower highs and a second upward trend line that connects a series of higher lows (just like in the chart above).
When the index breaks below the 6,750 support, it would indicate that downside momentum is likely to continue or may even become stronger as traders reduce their holdings in anticipation of further slide in prices. In this scenario, the index could retest the support of 6,612 formed during the sell-down last January 29.
On the other hand, when the index breaches the 6,900 resistance, it could mean a reversal of the short-term bearish trend. In this case, we could see the index testing the next resistance levels of 7,000 and 7,082 and placing into the limelight the major resistance level of 7,327.
In both cases, beware the Ides of March…
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