Where do we go from here?

Just a few days after the Holy Week break, we have seen the Philippine Stock Exchange Index (PSEi) again hit high upon high, breaking its own record close to 26 times this year alone, and moving up 12.86% in the process.

This places the PSEi as one of the best performing markets in the Asia-Pacific region. On April 7, PSEi climbed an intraday high of 8,136.97, up by 44.94 points.

Looking at the market from a technical point a view, the PSEi was literally sideways since February but broke out of its slump and made its way past 7,865.  The price range around 7,865 was something very significant as this represented an area where investors took profits each time the market was trying to reach that price range.

To those who are new to stocks, when majority of the investors in the market start selling, prices normally drop and fall.  As a rule of thumb, more buyers bring prices up while more sellers bring prices down.

What is amazing about the market is there are different reasons that motivate people to buy and sell.  People can look at the same piece of information, but those who see the data more positively may buy, while those who see it as something that is not so good may sell.

Each investor may have his or her own reasons to buy or sell aggressively – similar to what happened on March 26 when buyers overwhelmed the sellers which eventually propelled the PSEi higher than ever.

Up or down?

Now the big question is, where is the market headed now?  Is it continuing its upward trend or is it correcting soon?  No one has a crystal ball to predict where the market will go on a day-to-day basis.

However, there will always be fundamental and technical principles that can serve as indicators – a general direction where the market and the economy are, as a whole.  They can provide hints that may help us decide on how we  conduct our trades.

Here are 4 indicators that are still prevalent in our market today:

1. From a mid- to long-term perspective, our market is still bullish and will remain bullish until proven otherwise. 

What does this mean?  We can expect the market to still progress in its uptrend until any technical indicators indicate bearishness in the market.  If you are invested, keep riding on your stocks that are in uptrends and start selling once it starts to reverse.

2. Nothing has changed in our economy from a fundamental perspective.

Consumption is still the name of the game, brought about by overseas Filipino remittances and the Business Process Outsourcing (BPO) sector. This will continue to be the theme of our economy for years to come and will be a catalyst to bring our market even higher. 

Inflation and interest rates still remain relatively low – good and healthy to create a more robust environment for business.  Oil prices are still relatively low, which will give the Philippines a bigger room to flex its muscles because lower oil prices mean that businesses and consumers spend less to operate and will have extra funds to use on other things.

3. Our market is not really cheap.

We are one of the relatively more expensive markets in the region.  This may be a trigger for some investors to be more cautious as they may wait for prices to go down.  In spite of more expensive valuations, foreign funds continue to pour in and have been buying at relatively higher levels.

4. The market will not go up forever.

No matter how good our economy is or how bullish our market can be, there will come a point when investors will cash in and sell massively. A negative occurence in either the local and global economy may spook investors and cause them to sell or do something that is minor and petty.  When investors think they have earned  enough, they sell.

The traders’ and investors’ goal is not to be scared as markets can either move up or down but to stick to their plan no matter what.  It would be vital not to follow your emotions because at times, when the markets move higher, people normally tend to cave in to greed and just buy and buy even when logic and strategy tell them to do otherwise.  Do not cave in to that.

Even as markets are currently up, we will still move higher because you stick to your trading plan no matter what.  Your buying and selling decisions should be anchored on sound fundamentals and technicals so that you have something to follow regardless of the prevailing market conditions.

Now looking at the market from a shorter perspective we could see the following:

For the market to move higher over the short-term, it must hold and stay above 7,865.

If it does, it may try to push upward to around 8,200 over the next few trading sessions.

However if it fails to stay above 7,865, we may see the market correct to around 7,728 over the short term.

I hope this helps you in your trading and investments as you move toward financial freedom. – Rappler.com

 

Marvin Germo is a registered financial planner, an author, personal finance consultant, and a stock market trader and investor. He has around 8 years of experience in the Philippine financial industry. He specializes in technical analysis and position trading. Read his blog. Follow him on Twitter: @marvingermo

 

Charts from ChartNexus