Most people have their “come to God” moment when all hell breaks loose—pun intended. Others find “true enlightenment” when a continuing situation keeps getting worse and hope is lost.
For 38—less three—consecutive trading days, the Philippine Stock Exchange Composite index (PSEi) has stayed between 7,200 and 7,400. Not only is a 2.78-percent range from bottom to top minimal, to have this price movement drought for some seven weeks is astonishing.
But eventually—coming like the rains in California—this will end. In the meantime, local commentary from “experts” and “The Year Ahead” briefings from local stock brokers is right out of the television show Vikings.
The Norsemen invaded England and the Archbishop proclaims the attack is punishment “for our sins and transgressions”. One nobleman disagrees, saying, “This is an attack from the devil. We fight”. Still another castle lord tells them they are both wrong. The Vikings are only raiders who want to steal English treasure. A similar conversation now takes place on the stock-market trading floor every day.
Solutions to the armed invasion range from prayer and sacrifice to bribing the Vikings to go away. Be very worried if you see someone leading a goat or fatted calf to the front of the stock-exchange building.
Stock-market investors are trying to figure out how they want to adjust to 1) higher oil prices that see little trend of going back down; 2) local interest rates that are trading up and down against support and resistance; and 3) the five-month depreciating trend of the peso.
There is not any particular pessimism and worry. It is more of confusion of what those three factors will mean for the future. Remember, money is put in or taken out based on what we all think the future is going to be. And right now, none of us seem to have a strong opinion of what the future is going to hold.
So right now, buyers are coming in at support hoping that future buyers will eventually take out resistance. Likewise, sellers are selling out at resistance thinking that more sellers will force prices to break lower from support. And then the cycle is repeated again and again. Buyers do not want to be late, believing that a break of resistance will move the PSEi to 7,800 or whatever. Sellers do not want to be late, believing that a break of support will move the PSEi to 6,500 or whatever.
Many issues have exhibited three trading patterns in this sideways market. There are those that are continuing to go up against a broad neutral to negative trend. Others have gone higher and are now showing signs of reversing down. Still, others in the past two weeks look like they are ready to break higher.
The first group includes Agrinurture Inc., BDO Unibank Inc., Belle Corp., China Banking Corp., Crown Asia Chemicals Corp. and Energy Development Corp. in particular. To a lesser extent, Metropolitan Bank and Trust Corp., JG Summit Holdings Inc. and Melco Crown (Phils) Resorts are, perhaps, taking a short break before continuing to move higher.
Stock picking in March 2017 is going to be exciting and challenging. But also, it is going to be exceedingly profitable finding lush oasis in the middle of a dry wasteland. Will it be “blue chip” or basura issues? “Big cap” or “second line”? Just wait.
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E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.