The Philippine Stock Exchange Index or the PSEi suffered a major blow last year after marking a record high of just 7,400. As you can see, the index effectively erased majority of its gains to end 2013 with only a marginal gain of 1.3% after initially rising by 28%. Despite last year’s roller coaster ride that ended on the not-so-pretty side, our outlook on the index still looks positive at least from a longer term perspective. Check that the index is still riding its major bull trend line that has started since 2009. In our opinion, the index is now at the tail-end of the 4th wave of a bigger wave 3. It, however, can still fall to as low of 5,500 – the level where the long term uptrend line passes through. In any case, the index may swing back to at least its former high at around 7,400, marking the said 5th wave of the bigger wave 3. For it to do so, it has to rise above its downtrend resistance of 6,400. On the other hand, a break below its major uptrend line can be disastrous and send it quickly to at least 4,800.
For our 2014 outlook, it’s hard to say if the index will end the year back at 7,400. However, given its present technical set-up, it is possible that it may reach for its former highs at one point during the year. This potential also lines up with the index’s 6-12 month fundamental consensus target of 7,200. One major risk to this, however, is a potential depreciation of the Philippine peso against the US dollar. The USDPHP pair now is threatening to break above a key resistance at the 44.88 marker. A successful breach of this mark may then send it to a target of 48.00. This may then prompt more foreign funds to dump their holdings in the Philippines.
For those who are interested in technical analysis or learning how to profit using charts, we have an upcoming Technical Analysis Course on February 22 – 23, 2014. For more information, you may send us a direct message here or text/call (+63) 917 899 90 09.