January 12, 2016

TECHNICAL BULLETIN

Bearish Swings to Hatch into New Opportunities

The Philippine Stock Exchange Index lost 287-pts
yesterday continuing its slide below major support. Its
6,600 major support shelf, hosted by a 4-month long
consolidation, was broken last Friday and reactivated
the declining trend of the index.

BEAR MARKET DEFINITIION:

a downturn of 20% or more in multiple broad
market indexes,... over at least a two-month
period
The heavyset decline has cast the PSEi back to 6,288
and this shows a decline of over 22% from its April
2015 top of 8,130. Take note that this 20% threshold is
the first and defining element that calls a Bear Market
followed by two necessitating corollaries to confirm it.
Such corollaries suggest that the index must be
followed broadly and must stay below the 20% zone
for two months or more. If you look at the line up
below, you can see that more than one sub-index as
well as the All Share Index (PASHR) has already violated
the 20% marker.

Index
2015 Top
Current
% Lower
PSEi
8,130
6,288 22.66%
PASHR
4,642
3,627 21.87%
C/I
12,931
10,125 21.70%
FINANCIALS
1,888
1,436 23.94%
PROPERTY
3,339
2,545 23.78%
HOLDINGS
7,303
6,012 17.68%
SERVICES
2,272
1,383 39.13%
MINING/OIL
18,262
9,249 49.35%
This leaves only one element left to corroborate the
Bear... to stay below this threshold by over two
months, unfortunately this may take some time to
officially call out. This is time that short term traders
dont have as it requires trade decisions to be made
now. Short term support stops have already broken,
which consequently requires some lightening to stave
off risk and should not have to wait for an official bear
call to protect its value. But calling out a bear market

Support Break (6,600)

20% Drop (6,504)

or not inconsequential in arriving at short term

decisions, as pressing trends already point towards a
decline. But medium term trends (looking between 6months to about a year) may be affected by bearish
tones as it guides towards brief rally swings and
enforces continuing sell on rally sanctions, as major
trends move to point down.
Looking into the positive side, the recent weigh down in
prices may just be what the doctor wanted as it does
achieve putting pricey valuations back to where they
can be more attractive.

And although the PSEi breaks major support

and slides into bearish territory, it may soon
open into yet another trading opportunity
Stock prices have already fallen down too fast too soon
and multiple markets do show oversold conditions. The
PSEis RSI is now closer to 20% (heavy oversold levels)
and the price spreads to their very short term moving
averages is getting quite wide suggesting a similar overstretch. This selling squeeze may open up into a short
term rebound and present some quick trade windows
that could potentially scoop up some 4.25%-5.8% in
trading gains if it were to rally to resistance now, or
between 6.5% - 8.2% or more if it were to fall first to
6,100 or lower before rebounding.

Disclaimer: All opinions and estimates constitute the judgment of COLs Equity Research Dept as of the date of the report and are subject to change
without notice. The report is for informational purposes only and is not intended as an offer or solicitation for purchase or sale of a security.

TECHNICAL BULLETIN
Turning a Crisis Moment into an Opportunity
As our market comes to look for next supportive points,
one must move to act on appropriate plans of action to
potentially take advantage of the recent sell down.
First things first... Align your plan with your investment
period. If you are trading into the short term, then
assess short term potential versus short term risk. After a
heavy down squeeze (oversold condition) the markets
ability to fall (into the short term) narrows, thereby
inhibiting risk. Upsides widen especially after very
oversold conditions surface (showing RSI values closer to
or below 20%). It is important to point out that such
oversold levels need to be seen to highlight selling
exhaustion and to suggest that there may be rebound
power. Your objective is to scalp the oversold condition
and take profits as soon as prices rebound closer to very
short term resistance (you can estimate these zones by
using an 8 to 16-day Moving Average).
If you are trading with a medium to longer term point
of view, then time is on your side. You can afford to wait
for more appropriate reversal signals such as extreme
oversold levels, bullish divergences, or reversal patterns
before buy backs. For those using cost averaging, please
continue your buying plans as this is the opportunity to
pick up more shares at phenomenal prices. As I pointed
out in my Tech Spotlight last Jan 8, markets rise and fall
but do rise again and in bigger fashion. Thus try to avoid
acting on fear and keep a level headed mindset as time
should vindicate your venture into buying quality stocks.

better quality items, your portfolio will enhance its

ability recoup, stay more liquid, and should present
more convincing arguments to hold on to. You may
find quality picks from our COLing the shots reports
or our EIP stock list.

Taking track of some projections

Given that the index has broken below a major
trendline and has cracked major support few days ago
while tagging the 20% bearish zone the need to
measure out downside potential may help a trader
decide on buying & selling actions. Also keep in mind
that whenever such 20% zones are hit & confirmed, it
usually does so after factoring in about 80% of the
intended downward move already. This too may
present the inclination of looking potential prospects
as they come, rather than the being too bearish.
Its far better to buy a wonderful company at a fair Fibonacci retracement estimates of 38.2% draw out a
potential reaction to 5,700 if its 6,300 & 6,000 minor
price than a fair company at a wonderful price.
support structures cannot hold (channel lows). Ones
- Warren Buffet
level of buying aggression should come to manifest
more strongly as prices near the stronger 6,000 to
Dont be too aggressive...but be quality assertive
Although oversold conditions may warrant a worthy rally 38.2% region and less so if it only reaches the 6,300
in this round or perhaps into the next reaction, do keep in zone. Rebounds from the latter will likely be more
temporary and fleeting, but reactions to stronger
mind that the markets present trend is downwards and
areas of support may present the sweet spot that
that there is no need to act in haste. Take time to
both Technicians & Fundamentalists now agree on.
recalibrate your portfolio and gradually pick up better
quality stocks in such reactions to support and use rallies When the price and time is right- ACT!
Warren Buffet teaches us the wisdom on acting
to unwind lower grade picks. Moreover just because
sensibly when others become too fearful, as it does
prices fall heavily all around, the seemingly biggest
present a meaningful opportunity that infrequently
discount may not be the best buy... especially if the
comes. It would be a shame to let such prospects go
quality of the issue is mediocre as there may be reason
without benefit, as too much emotion may get into
why it is down so much. So buying on price & quality is
the way.
just as important to stay abreast with buying top quality
stocks such as blue chips and the like. As you move into
Authored by:
Juan G. Barredo
Chief Technical Analyst
COL Financial Group Inc
Juanis.barredo@colfinancial.com