Philippine Equity Research

Oct 21, 2014

Focus Items

Issue

Philippines
Peso-$
DJIA
SP500
Nasdaq
England
Nikkei
Hong Kong
China
US 30yr Bond
10-Yr Yield
Dollar Indx
Gold
Oil
GTX

Previous

Current

Change

7,003
7,058 54.31
44.910
44.927 0.017
16,380
16,400 19.26
1,887
1,904 17.25
4,258
4,316 57.63
6,310
6,267 (43.22)
14,533
15,111 578.72
23,023
23,070 47.05
2,341
2,357 15.55
142.11
142.20 0.09
21.990
21.810 (0.180)
85.290
85.050 (0.24)
1,238.50 1,244.70 6.20
82.92
81.91 (1.01)
4,206.79 4,183.46 (23.33)

YTD %

0.78
0.04
0.12
0.91
1.35
(0.68)
3.98
0.20
0.66
0.06
(0.82)
(0.28)
0.50
(1.22)
(0.55)

19.83
1.20
(1.07)
3.01
3.34
(7.14)
(7.24)
(1.01)
11.38
11.66
(27.92)
5.93
3.31
(17.01)
(13.38)

Authored by:
Juanis G. Barredo
VP; Chief Technical Analyst
COL Financial Group Inc.
(632) 636-5411
Juanis.barredo@colfinancial.com
Disclaimer: All opinions and estimates constitute the judgment of COLs Equity Research Dept as of the
date of the report and are subject to change without notice. The report is for informational purposes only
and is not intended as an offer or solicitation for purchase or sale of a security.

Issue
Estimating Rallies
DOW
PSEi
MSCI Phils EPHE
PHI

Highlight
Over or Under major support
Stay light or lighten into rallies
Lighten into rallies
Lighten into rallies
Lighten into rallies

Page
2-3
4
5
6
7

DAYS HIGLIGHTS
US markets proceed to show a technical rebound; Europe slips
Asia mostly rebounds led up by Japan (+3.9%)
The US Dollar index eases down allowing the Euro and Gold to
rally; Oil presses down once again falling to $81.91 (-1.2%)
The Philippines PSEi was up 54-pts along with Asia holding
above its 130-day MA support of 6,900
Trend Watcher: Corrections & Consolidations
Notes: US indices continue to show a technical rally; may allow
the PSEi to do the same in target of short term averages
US markets proceeded to rebound last night and proceeds its
attempt to narrow spreads to its short term averages. As such we
would expect that rallies could have an eye nearing the 16-day
MA if not the 32-day MA as potential rally targets. Europe was
not as strong as it followed on the weak opening of the US market
which closed higher only after Europe closed the day lower. Asia
may still take good light of the US rally but will have to abide by
the individual state of issues as many show diverse trend states.
Stocks trading below their 65-day Moving Average and show
negative MACD reads may show more difficulty in sustaining
rallies. This rule of thumb or centering can be used to adhere to
whether or not one would opt to range trade or steer clear for the
time being until technical readings show improvement.

Tech Spotlight

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Page 2

Estimating rallies: Over or Under major support

Rallies from oversold positions may be temporary
The last few weeks have thrown some markets into
corrective disarray as a number of trendlines, moving
averages and MACD cross downs particularly into
negative territory have been shown, announcing the
ongoing corrective phase
But recent oversold conditions may need to stage
technical rally attempts to try to fix recent downside
extendedness and attempt to reel in wide disparities to
short term moving averages (16 or 32-day)
This begs the question whether we can trade such
rebounds or not an attempt to put validity into an
imperfect trade
Knowing your center (of major support)
If a short and medium term trend has been disrupted,
showing a violation of the 32 and 65-day Moving
Averages as well as registering a Negative MACD
reading you may want to forego taking such trades
until stronger formations re-appear to set up a better
trade climate
Stocks or indices rallying while experiencing these
poor technical readings are drafting technical rebounds
these are oftentimes temporary in duration and could
draw out choppy sways back closer to short term
moving averages (16 or 32-day MAs)
And until proper reversal prospects appear such as
down trendline breaks along with double-low bases,
higher-low bases and positive MACD readings we
would have to believe that the center (of support) has
broken calling for us to stay defensive until better
traction is found

Tech Spotlight

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Page 3

Estimating rallies: Over or Under major support

Rallies from Philippine Stocks
Recoveries from Philippine issues have to
also be rendered with close scrutiny as
some present stronger or more durable
pullbacks to major support while others
have already broken below such support
centers and need more defensive
maneuvering
BDO and MEG are examples of stronger
trend formations as recent pullbacks have
only managed to tag their 65-day Moving
Averages and so far show holding power
above it
Others like MBT and COSCO are clear
examples of what can happen when such
important support centers (blue arrow
spots) are broken these coincide with a
clear breach of their 65-day Moving
Averages
Although such reactive trends could one
day reach oversold areas and may need to
stage technical rallies as well but such
rallies can be brief and only try to narrow
the distance to their short term averages as
their intent not yet to reverse the declining
trend
Thus such issues UNDER major support
may need to linger through a Lighten read
and at best can only be range traded until
such time that these technical faults are one
by one overturned

Tech Spotlight

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Page 4

US: Dow Jones

Recommendation: Lighten into rallies /range trade
Support: 16,300 -16,015 Resistance: 16,644-16,876
The Dow climbed 19-pts and continues with its oversold
initiated rally but still depicting a corrective phase
Its heavy down turn hit Fibonacci retracement estimates of
16,340 (38.2%) and 16,030 (50%) and even came close to its
61.8% zone of 15,718 in practically one swelling swoop
this is why the rebound was necessary
MACD readings still composes itself to show an ongoing
correction and should be handled as such until signals can
improve
The disparity between current prices and its short term
moving averages (16 & 32-day) also ask for some rally action
rallies closer to the 16-day MA may be more appropriate
selling initiatives

Tech Spotlight

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Page 5

Philippines: PSEi
Recommendation: Lighten into rallies /range trade
Support: 6,900 - 6,800 /6,600 Resistance: 7,080 - 7,190
The PSEi rebounded 54-pts proceeding with its recovery
after hitting its 130-day MA support of 6,929-6,900
Its MACD readings continue to show lingering corrective
drive which keeps the threat level open
The breach of short and medium term averages ask for
some lightening preferably if an opportune rally surfaces
back to these levels
An earlier disparity between current prices and its short
term moving averages (16 & 32-day) also ask for some rally
action rallies closer to next resistance or the 16-day MA
(whichever is lower) may be more appropriate selling spots
After a rally we still expect a reaction to retest or reconfirm
support a higher-low would be preferred to show
strength but given negative MACD readings we need to
wait and see its intent

Tech Spotlight

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Page 6

US iShares MSCI Philippines: EPHE

Recommendation: Lighten into rallies /range trade
Support: 36.32- 35.59 Resistance: 38.03 38.50
The MSCI Philippines rallied 0.23-pts still airing a rebound to
target its short term resistance
An earlier spill down to its next major support hitting its
July-June 2014 lows of 36.32 and 35.59 offered the ability to
rework some demand
MACD readings continue to show corrective bias but has
room open for the rally
Until demand can confirm its support we should treat this as
a rally and that a possible 2nd support test may surface it
would be preferred that a higher low be produced to show
stronger following
Next short term resistance is adjusted to 38.03-38.50

Tech Spotlight

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Page 7

PLDT-US (PHI)
Recommendation: Lighten into rallies /range trade
Support: 65.81 63.37 Resistance: 68.93 71.49
PLDT-US rallied $0.66 (+0.93%) proceeding with its oversold
rebound after hitting its August support low of $65.81
A technical rebound would first be a reprieve from the
selling initiative that allows for a rally to short term
resistance (we estimate resistance closer to $71.59-$72.00)
Then a reaction should be attempted to retest or reconfirm
support ( to try to produce a 2nd low base )
MACD shows the rally swing but the negative reads still
keeps the corrective environment open and proposes for
the possible need to retest
A lighten into the rally is preferred although some may
chance a quick range trade but these are imperfect entry
spots given that short and medium term support structures
have been broken and argue for a corrective trend
Price parity of PHI to TEL stands at ($71.44*44.927 = P3,209)