The Philippine Stock Exchange Index (PSEi) or PCOMP has been seeing some wild and scary ride for the last couple of weeks. After enjoying consecutive days of marking new all-time highs, the index suddenly saw its gains for the year disappear in less than a week. So the question now is, will the local equities recover or will it finally fall into a bear market?
As you can see from its daily chart, the index’s long-term uptrend line spanning from the bottom of 2009 to present has magically caught the index’s fall. Interestingly, its 200-day moving average, which lies just around the 4,150.00 region also acted as a support to keep it from falling any further. Indeed it appears that the buying interest 4,150.00 to 4,200.00 area is high since not even a 4.60% drop in the Dow Jones Industrial Average (DJIA) in the US was able to pull the index much lower.
Zooming closer, you will see that the index’s condition is already oversold as suggested by its RSI. Moreover, a presence of a ‘hidden bullish divergence,’ where the price marks higher lows while the RSI makes lower lows, indicates that the recent correction could end soon. If indeed the index rebounds, it could once again attempt to reach its present all-time high just above 4,500.00. A fall below 4,150.00, on the other hand, could send it down to at least 4,000.00.