Profit taking expected after last week’s rally

profit taking expected after last weeks rally - Profit taking expected after last week’s rally

By Denise A. Valdez, Senior Reporter

THE MAIN INDEX may start declining this week after five straight days of increases that brought it to 6,484.06 on Friday.

The benchmark Philippine Stock Exchange index (PSEi) gained 139.43 points or 2.19% in the last trading session, maintaining a weeklong climb that raised the index by 585.59 points or 10% on a weekly basis.

Value turnover grew 54% to an average of P8.5 billion. Foreign investors became net sellers, posting an average net inflow of P4.12 million from the prior week’s average net outflow of P726.6 million.

“The local market staged a strong rally which brought it up by 9.93% week-on-week. With the quick surge however, the local bourse is now at the overbought territory making it susceptible to profit taking. Thus, we may see a pull back in this week’s trading,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a text message.

Prospects of economic recovery backed by the easing of several quarantine rules and the start of the release of third quarter earnings reports helped lift the market last week. The PSEi marked its best week since June after breaking through the 6,000 level.

While this week is expected to see some profit taking, Mr. Tantiangco said the PSEi is still likely to hold its ground at the 6,000-6,100 support range due to sustained optimism for the fourth quarter.

Specific catalysts for this week’s trading will be the earnings reports of BDO Unibank, Inc.; Manila Electric Co.; and Puregold Price Club, Inc.,  online brokerage 2TradeAsia.com said.

“(They) would set the tone for trades, not only for their size (~P900 billion in market cap, 10.7% of PSEi basket) and contribution to their parent companies, but also as proxies for their respective industries, being sector leaders,” it said in a market note.

“A critical price gap between 6,000 and 6,750 made during the collapse last March will be the next hurdle. This is mostly likely to be the next resistance, especially as the index attempts to find stabler footing above 6,000,” 2TradeAsia.com said.

As for downside risks, Mr. Tantiangco of Philstocks said investors would be watching the coronavirus case count. Any spike due to the relaxation of quarantine rules may cause investors to worry.

The Health department reported 2,057 new coronavirus cases on Saturday, resulting in a total case count of 367,819.

Another factor that may pull the local market lower is any negative news on ongoing talks for a US fiscal stimulus, as it may weigh on Wall Street and thus spillover to the PSEi, Mr. Tantiangco said.

Philstocks is putting the market’s support within 6,000-6,100 and resistance at 6,600. 2TradeAsia.com put immediate support at 6,000 and resistance between 6,500 and 6,750.

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