Market expected to remain volatile

MANILA, Philippines – The stock market is expected to remain volatile this week even as it tries to establish a support base at 7,700.

At the same time, analysts said the week’s close in positive territory could encourage more tests toward the 7,800 levels.

“Chartwise, the week’s close at 7,723.60 encourages more tests toward the 7,800 levels, despite the near-term bias remains for a test of the 7,200 to 7,500 levels. Only a move above the 7,850 to 7,870 could entertain a reversal is in place,” said Jonathan Ravelas, chief market strategist at Banco de Oro.

Last week, the benchmark Philippine Stock Exchange index (PSEi) rose 2.25 percent week-on-week, snapping a six-week long losing streak to close at 7,723.60.

This comes after the US Fed announced its decision to keep policy rates steady in its meeting last week.

At the same time, the Fed said a rate increase is still likely by year-end.

Luis Limlingan, managing director at Regina Capital said the PSEi is expected to trade mixed this week.

“We expect the PSEi to trade mixed this week as it will try to establish a support base at 7,700. This is an important level to watch because a successful hold will create enough demand to sponsor further recovery toward 7,800 to 7,850 resistance targets,” Limlingan said.

He said that intraday volatility is still a concern.

“Fortunately, the mood of the current price reaction is more on recovery rather than corrective. Technical-wise, both directional and momentum indicators remain below trigger points despite recent run-up so putting tight stops on trading positions is important until all corrective threats are fixed,” he said.

He advised a cautious buying strategy especially for issues that have just broken out of their key resistance points.

Online research portal 2TradeAsia.com said fund managers are likely to take advantage of depressed prices and scout for stocks likely to outperform, especially in the fourth quarter.

Run-ups may also come from spilled over positive sentiment from the latest Federal Reserve decision and reduced possibility of an interest rate hike in its next meeting in November due to US elections, it said.