Expect volatile trades ahead

Analysts see another volatile week at the local equities market this week as investors continue to look for directions in the macroeconomic environment and even in the global scene.

The Philippine Stock Exchange index (PSEi) may fall below 7,500 this week, analysts said.

Last week, the PSEi declined 41.87 points, or 0.55 percent, to finish at 7,578.29.

“Another volatile week is expected, as the search for macro catalysts continue. The focus might be on currencies, pending the outcome of economic data and the nearing political race in the US. A case of a weaker peso would favor sectors belonging in services (BPOs), exports and those with dollar-based topline ( holdings),” said 2TradeAsia.com, the online financial services company.

Nonetheless, the company said investors may take advantage of bargain prices.

“Immediate support is 7,500, secondary at 7,400, resistance 7,650,” it said.

Investors keenly awaited the US jobs data released by the US government on Friday.

According to the US Labor department, employment grew for the third straight month in September but the jobless rate also rose.

However, this is not expected to prevent the US Federal Reserve from raising rates in December, analysts said.

2TradeAsia. com said traders still see lower chance of an interest rate hike, even as some Fed officials already warned them not to rule out the possibility of a hike next month.

“On top of that, OPEC members are also set to meet in Istanbul from Oct. 8 to 13, the outcome of which could possibly take its toll on crude futures prices. Last week, we’ve seen crude breach $50 per barrel, and this may continue to trade higher if this week’s meeting provides clear and certain details as to how major oil producers will cap their output,” it said.

Luis Limlingan, managing director at Regina Capital said the PSEi is expected to continue moving sideways this week but the convergence of its support or resistance points suggest that a significant movement is about to happen.

PSEi levels to watch out for are 7,720 and 7,580, analysts said.

“The index is still trading in higher volatility environment so a decisive breach of either levels would immediately trigger strong movements. On the other hand, failure to hold support will trigger a breakdown which could even pull prices below 7,500,” Limlingan said.

He advised maintaining a range strategy and keeping a close watch on support resistance levels. Maintaining support stops is also advised to provide protection against sudden drops.

“Like last week, we are bullish on issues trading in a defined swing pattern while advise caution on trending issues as they contain a higher relative volatile which makes them vulnerable to market reactions,” Limlingan said.