A couple of days ago, the shares of DMCI or DMC in the Philippine Stock Exchange appeared to have broken down from a head and shoulders formation (please see my previous post here). More often than not, a break down from such pattern would place a lot of selling pressure on the stock. However, the breakdown gets invalidated when its price rose back above the formation’s neckline. I myself was caught in a “bear trap.” Now, DMC looks to have just broken out from a falling wedge pattern. Given this, I have to readjust my take on DMC from a bearish one to bullish.
A falling wedge pattern for technical analysts is a bullish continuation pattern since it just reflect a temporary dip or a correction in prices. As you can see from its updated daily chart, DMC now has even moved above the red moving average which used to act as a resistance. Notice also that the MACD is about to make a bullish crossover. The RSI is likewise crossed above 50. Therefore, if buying interest persists, DMC could once again reach aim for PHP40.00 or its former high at PHP 41.00. Otherwise, it could weaken as well but the PHP 35.00 marker and the red moving average should keep it afloat.