The past 3 months weren’t particularly well for the Philippine Stock Exchange Composite Index despite all the positive hype that the Philippine economy has been getting as of late. The PCOMP or PSEi, being a leading barometer of the Philippine economy, has been telling a different story. As you can see from its chart above, the index has been steadily losing ground as it has been trading within a descending channel since it peaked at a high of 4,413.42 back in November 4, 2010. Since then it has already lost around 15.53% when it closed to 3,737.04 last Friday (February 25, 2011).
So the question that a lot people are asking is, “Where will the index go now?”
Well, I’m sorry to break the ice but in my technical point of view, the index and most of the listed stocks could face some more selling pressure in the days to come. You see, the index had already broken its primary uptrend (the one which could be traced back to to its bottom back in March 2009). Moreover, the last major support that should prevent it from falling further, which is its 200-day moving average, was also recently breached last week for the first time in almost two years! The index has now been trading below the said moving average for three straight days. Hence, if it does not rally past it in the next few days, then most likely it would head lower. Even it it does rally, a heavy resistance at the 4,000.00 level and the channel’s resistance could still weigh on the index. On the even bearish note, a move below last week’s low of 3,705.58 could send it down to 3,600.00.
Given the index’s present trend, which is downwards, and the uncertainty in the markets due to the political turmoil in the Middle East, I think it is prudent that we at least lighten up our long positions. At these times, it is better to stay away with our money intact for awhile and just re-enter the market again when everything has cleared already.