Riding the Bucking Bull - 1st Half 2012 TECHNICAL MARKET OUTLOOK

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Early this week Citiseconline (COL) held a market outlook briefing entitled "Get a Grip on Market Insanity."  Juanis Barredo, Chief Technical Analyst of COL, presented "Riding the Bucking Bull," COL's Technical Market Outlook for the 1st half of 2012.  Here are the highlights of that presentation.

Market Overview:
- Markets have generally moved higher picking up confidence
- Liquidity flows due to low interest rates have enhanced upward swings
- Philippines outperforms but extended swings may press for temporary corrections (not a mjor one)
- Be aggressive in your trading tactics.
- Inflation is tempered as the global market pushes forward to recovery. (more after the jump)

As you can see from the charts, the Philippine Stock Exchange Composite Index and the Dow Jones Industrial Average have broken last years' highs which could result in short-term profit taking that can bring about a short term correction as well.

Over the last 6 months, the PSEi has outperformed other indices from the USA, China, and Japan with a 38.5% run up.  It is second to Japan in terms of year-to-date (YTD) performance.  Japan has a YTD of 20% while the PSEi has a YTD of 18%.  This means that if you bought an equity-based mutual fund like the Philippine Stock Index Fund from ALFM on January 1, 2012 and held it until today, you would have had an 18% return on your investment already.

The uptrend is in tact.  Support levels are at 4,900 and 4,790 while resistance levels are at 5,220 and 5310-5500.  Support levels indicate the levels where in some buyers from the market could come in and prevent the index from falling further.  While resistance levels indicate the levels where in investors would start to take profit therefore stopping the advance of the index.  Levels are only broken when significant volume (demand) from the market is present.

The PSEi (and some world indexes) are now in Elliot Wave 3.  Basically, the Elliot Wave Principal states that when markets go up they tend to go up in waves of 5.  And when markets correct, they tend to do so in waves of 3.  Right now the PSEi is only at Wave 3.  That means even though it would correct and enter wave 4, there's still wave 5 to aspire for.  Be mindful however that this is not exact science.  It's just an observation how markets tend to behave.

According to Juanis Barredo, Elliot Wave three (3) is usually the largest or the longest.  As it starts, the news is probably still bearish as viewed by most market.  With the advent of positive news, analysts start to raise earnings estimates.  Prices then tend to rise quickly and corrections are short-lived.


Metrobank - MBT 
(Upward Channel - Range Trade - buy and sell as the channel dictates)

Metro Pacific Investments - MPI 
(Breakout from long consolidation - after a short correction, uptrend should resume) 

Oriental Peninsula Resources -ORE
(Uptrend - fast moving, be diligent.  Overbought levels - profit-taking could happen soon.)

More than looking at the technicals, Citiseconline would like to recommend stocks that are fundamentally sound - meaning the company has is stable and is consistent in delivering earnings.  Some of these companies are listed in the chart below.  Looking at the short-term trends, it's good to point out that they are all in an UP TREND.  Juanis Barredo suggests looking at the RSI levels and waiting for them go below 60 before buying back in.

Citiseconline's forecast is for the PSE i Index to reach 5,500 at the end of 2012.
Here's the video of Mr. Juanis Barredo's presentation.

Happy Investing Money Magnets, continue to attract wealth! 

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  1. al samson said,

    To know more about stocks, stock market and stock investing, you can visit our PSE Website- www.pse.com.ph and PSE Academy Website- www.pseacademy.com.ph .We hope that we could help you give information to your readers about basic stock investing. Thank You.

    on May 25, 2012 at 9:15 AM