PSEI 2010 and Beyond :)

This is just my view of the PSEI based on my understanding on Fibonacci and Elliot wave. Triangles are typical of 4th wave of a five of an impulsive wave. I can see a possible breakout from this triangle which would possibly bring the PSEI to the fith wave that may rest on the 4800-5500 level. However, fifth waves sometimes fail to materialize so it is still not 100% assurance but if you look at the bigger picture, I think the fifth wave MAY come. After this, we may expect a 4-6month three wave correction OR More.

Just my thoughts.

UBP

When you examine Philippine banks, UBP should be one of the lowest in terms of PE ratio. Its eps growth has been consistent these past few years even through the 2008 crisis. Based on chart, its price movement can be likened to ABS in the beginning stages. Now ABS is in the level above its long term resting zone 46-56. Way above its 2007 peak of 38.5. UBP had its 2007 peak at 66 while long term resting zone is at 75-87 level. Its immediate resting zone is at 50-52 level.

MHC

Most technical traders would notice MHC nowadays because of its frequent joining the top gainers list. This is the reason I checked on its chart and found a Cup with a Handle forming.

However it has an immediate resistance at around 0.64(breakout point) and support at around 0.53 (buy near this but cut losses below this).

If you notice it's transactions everyday, it is very thin. It seems jockeyed to form bullish. Let's see if this gets noticed and gain volume.

Consistent Earnings Rise

Below is a list of PSE's stocks with noticeable consistency in increase of earnings per share for the past 3 years. This data can be used to gauge potential growth of a company. 2010 values are only projections based on average growth rate for the past 3 years. Here is the table for your perusal.

Do note that these values are from the PSE website. Same as any other stock mentioned in this blog, these are not recommendations but just my plain observations. I do not necessarily have them all.

For me Technicals win when there are no major fundamental changes. But fundamentals are the forces that push stock prices (up or down)  to form the Technical patterns depending on Market conditions. Thus it is wise to use both to succeed in stocks trading.

ABS-CBN

Cup and a Handle seems to be the popular alignment of the stars today. ABS when viewed in weekly charts seems to me like one. Let's see if it matures to be one.

On the fundamental side, its PE is just below 15. Revenues are expected to be up due to advertisements. Election jitters however gives this possible rise a dark side.

While everyone seems to be so scared of the election results, we can look at the DOW as our glimmer of hope. Why? In view of US presidential cyle, DOW tends to trend up around two years after their elections which is about now.

Anyways, here is the ABS chart:

This is the latest update for ABS (May 20, 2010). It finally broke out of its resting zone and entered the conservative target area. Time to sell for me since my target is reached. Surely 40+ is still achievable but the 38.5 resistance should be broken first with convincing volume. If this happens then it may be headed for its all-time high of 67 or more. But first it should rest at this new area it entered to have more energy for the leap. While resting you can see its RSI drop some points.

 Note: This is not a recommendation to buy. This is only my personnal view using the tools  I innovated out of the Amibroker codes (AFL) to come up with fibonacci bands from the detected supports and resistances. I am NO GURU so I am not an authority on Philppine stocks! I only made this blog so I can easily review my buy and sell points through my phone or any publicl internet cafe.

GURUs dwell in http://www.traderspizza.com/ and http://www.absolutetaders.com/.

Best PE numbers for YE2009

PE ratio is the Price per Earnings Ratio obtained by dividing the Current price of stock by the earnings per share (total revenue less the overhead divided by the number of shares).

The smaller the number of the PE ratio, the better. This means for every peso you invest, you get a higher earnings,thus the faster you can recover your capital. If a stock has a PE ratio of 5,this tells you that you can recover your capital from the earnings in 5 years. PE ratio of 50 means 50years.

For Value investors this number is very important. For me this tells much on the valuation of a stock based on the revenues.

Here is the table for your reference:

SCC

No doubt SCC has been one of the steady climbers lately. It has the characteristic of hovering just above 78.6%(pink) retracement after hitting the 127%(yellow)-162%(light blue) extension of the previous wave. Lately it has been doing so but today's low hit some kind of support line(gray) ending at a higher level for the day.This looks like a push towards the next level to me. Let's see what it does in the days to come.

My Fibonacci Study

After some observation with the Philippine stocks, I find Fibonacci levels very interesting since these retracements really happen in real life. This is the reason why I've done some research on the subject.

First, let me present an excel table to show how the golden mean 1.618 can be observed in large values in the fibonacci series. By the way Fibonacci Numbers is a series wherein the next number can be obtained by adding the previous successive numbers hence 1 1 2 3 5 8 13 . . . 5 is obtained by adding 2 and 3. 8 from 3 and 5, 13 from 5 and 8. Here is the table:



In fibonacci application to technical analysis, there are levels called retracements that are observed to be respected by the collective decisions of buyers and sellers in the market. These are 61.8%(0.618), 50% (0.5), 38.2%(0.382), 23.6%(0.236).There are also extensions like 161.8%(1.618), 261.8%(2.618)and 127.2%(1.272)

Notice that in a system composed of many elements all the retracements are very evident.

There are very important applications for fibonacci in nature and architecture. Shell formations, branching in plants, flowers, petals, bee hive. Even the great pyramids are applications of fibonacci numbers.

What I observed is the alignment of previous levels and the current levels and the applications are mostly in groups or crowds.

The very nature of price action whether it is in market for consumer goods, forex or the stock market is a result of collective behaviour of buyers and sellers. This, I believe is the very reason why fibonacci levels are respected in the stock market.

Below is an example Philippine stock that really shows respect on the fibonacci levels. This is the recent chart of AEV:

Right now I believe AEV is ready to move up again and based on the fibonacci bands the level it could hit before consolidation could be 18.2. However this is not 100% sure. No stock ever rises eternally. That uncertainty is the risk the reader must take when buying this stock.

April 21, 2010: Some noticeable charts.

PNB: Philippine National Bennant (Pennant).
Maybe... let's just wait and see..





















OREo cookie?


I view ORE's chart bullish based on retracement and a possible handle in the making.

FLI: April 21, 2010

FLI looks good! It bounced off 50% of the immediate wave and the 127% extension of a previous wave. Also it bounced off some kind of channel that points upwards. MACD and RSI are in reversal mode.

I expect 1.1 level to be reached but let's just see what the chart reveals.
Note: All the bands and lines (except fot the personal comments) are automatically generated. These are the bollinger, Moving averages and the fibonacci bands. The chart looks messy. Hence, wild!!

PSEI Analysis, April 19, 2010

PSEI looks bad today. If there is no intervention against the Goldman Sachs Fraud case, the index may return to 3000 before bouncing up.

As can be seen in the chart, 38.6% re-tracement is already breached. MACD is weakening and RSI just bounced off 70. These all points to breaching 50% retracement or, worse yet,the 61.8% retracement. This means the index may go down or sideways.

This is why I'm staying on the sidelines for now and left no stocks except for preferred shares which I bought for dividends. Such stock's price does not matter as long as the dividends pour in regularly.