Analysis: PSEi Went Down to 194.75 Points on February 5, 2018

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Stock Analysis - JayceeDeGuzman.com

Rod asked, “Any insight on why the market turned red today (February 5, 2018)?”

This question can get varying answers depending on who you’ll ask. Some will give you an answer derived from the technical analysis. Believe it or not, some will associate last week’s red full moon with what happened today.

I’ll tell you what I know. One of the common behaviors of stocks that have hit a new 52-week high is that they may go into a correction mode.

Why does this happen? Some investors have locked in gains. Some investors have chosen to hold their position and be in a wait-and-see mode. Most of the people who have the guts to hold their position are those whose average price is still above their trailing stop-loss price.

Philippine Stock Exchange Index - 2.5.2018

Now, as far as PSEi is concerned, it might test the 50% of Fibonacci near 8560. By classical belief, Fibonacci users believe that the price might rebound once it hits the 50% Down Fibonacci. However, don’t take that as gospel truth because things change when sentiments change. A wise trader adjusts based on what he sees and not on what he prefers to happen.

Today, 8560 was tested but PSEi recovered to 8616. Watch out for the 38.2% Fibonacci retracement near 8677. If PSEi will manage to stay above that level tomorrow, with support from foreign fundies, PSEi might regain its momentum to re-visit the 8800 level.

But don’t expect a rebound to happen so soon. PSEi has been experiencing 7 consecutive days of net foreign selling.

Consider the sentiment coming from the bigger global markets.┬áThe Exchanges in the US and Europe closed mostly in red. If you’ve been trading for a while now, you should have already noticed that PSEi is kind of piggy-backing the sentiment coming from bigger Exchanges particular those in the US.

Jaycee De Guzman

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