Stock Market Weekly: Slight downward bias seen 

WHAT HAPPENED LAST WEEK

Last week, the Philippine Stock Exchange index (PSEi) ended its five-week winning streak, dropping by 2.11% week-on-week (WoW) to close at 7,310.32 (-157.60 points). The market began the week on a high note, reaching levels not seen since January 2020.

However, positive sentiment was short-lived due to inflation concerns, with the peso depreciating back to the PHP 57.0 level and global oil prices rising to two-month highs amid the ongoing conflict in the Middle East. Additionally, the US Consumer Price Index (CPI) came in higher than expected at 2.4%, compared to the consensus estimate of 2.3%, dampening expectations of further aggressive monetary policy easing from the US Federal Reserve, and exacerbating the bearish sentiment.

WHAT TO EXPECT THIS WEEK

This week, we anticipate cautious market action with a slight downward bias due to a lack of catalysts and as investors brace for the upcoming earnings season. The market will primarily take cues from several US Fed speeches and Wednesday’s highly anticipated local interest rate decision.

Bulls may gain momentum mid-week as the Bangko Sentral ng Pilipinas (BSP) is expected to cut the benchmark rate by 25 basis points (bps) to 6.0%, following last month’s weaker-than-expected inflation print of 1.9% (estimates: 2.3%). However, rising oil prices and the continued depreciation of the peso could limit upward movement.

Resistance: 7,450 / 7,550

Support: 7,300

ANALYSIS

The PSEi snapped its 5-week winning streak to plummet by 2.11% WoW, closing at 7,310.32 (-157.60 points). The index took a steep breather after hovering at extremely overbought levels and overextending above key moving averages (200-day, 100-day, and 50-day). It is currently retesting its long-term support and short-term uptrend line at 7,300.

Moreover, the momentum indicator RSI has returned to the neutral zone, while MACD has signaled short-term bearish action. We suggest patience at current levels and waiting for the index to establish support around key levels.

STOCK CALLS FOR THE WEEK

DoubleDragon Properties Corp. | BUY ON BREAKOUT | NO CONSENSUS TARGET PRICE

DD is showing signs of a bullish reversal after breaking above its downward trend line and reaching a bottom at PHP 8.70. The price is currently hovering around PHP 10.20, just below the 100-day MA (PHP 10.71), which serves as a key resistance. With the MACD showing increasing bullish momentum and the RSI at 59.87, the stock has room to climb before hitting overbought territory.

A break above PHP 10.71 could lead to further gains, while failure to clear this resistance may prompt a retest of support levels around PHP 9.42 or lower. Accumulating DD once it breaks above PHP 10.70 is advisable. Take profits at PHP 12.30 and set stop-loss limits below PHP 9.84.

Robinsons Retail Holdings, Inc. | BUY | FMSEC Target Price: PHP 47.00

RRHI is currently trading within an upward channel, above key moving averages (20-day, 50-day, 100-day, and 200-day), but nearing immediate resistance at PHP 42.00. While the stock shows bullish momentum, the RSI at 62.99 suggests it is approaching overbought conditions, indicating a possible short-term consolidation.

We recommend buying at current levels (~PHP 40.00), as the overall technical outlook remains positive, with higher lows and increasing volume confirming the trend. Accumulating at current levels (~PHP 40.00) is advisable. Take profits at PHP 46.00 and set a stop-loss limit at PHP 36.80.

Puregold Price Club, Inc. | BUY | FMSEC Target Price: PHP 36.00

PGOLD is currently trading within an upward channel, above key moving averages (20-day, 50-day, 100-day, and 200-day), but nearing immediate resistance at PHP 34.39. While the stock shows bullish momentum, the RSI at 71.95 signals overbought conditions, indicating a possible short-term consolidation.

We recommend buying on pullbacks (~PHP 32.00), as the overall technical outlook remains positive, with higher lows and increasing volume confirming the trend. Buying on pullbacks near the breakout point of PHP 32.00 is advisable. Take profits at PHP 36.80 and set a stop-loss limit at PHP 29.44.

KEY DATA RELEASES

1. Philippine Interest Rate Decision on Wednesday, October 16, 2024, (estimates: 6.0%)

2. US Retail Sales month-on-month on Thursday, October 17, 2024 (estimates: 0.2%; previous: 0.1%)

3. US Initial Jobless Claims as of October 12, 2024, on Thursday, October 17, 2024 (estimates: 269k; previous: 258k)