Before anything else, let’s take a look at the PSEi. In the short-term, we see that the market is moving within a range. It broke below its support at 3,150 but notice the market’s strong rebound after doing so. Not only did we have two bear traps, we also have a failed bearish triple top. In the long term, the market’s uptrend’s support is still intact. Now, the question is, what will the market do next?
The Dow was down last Friday by 122 points. Also, notice that last Friday, we closed near the prior support of the market’s consolidation within its upper range. (Lower range and upper range is separated by a blue dotted line) Three times the market consolidated at its highs and three times the market failed to hold above its support. Given these, it would not be surprising if the PSEi corrects tomorrow. Now, we have to determine if the correction that would occur is just a pause before continuing toward its resistance at 3,350 or if it is the formation of bearish a lower low.
I think it useful to ask yourselves: Are you looking to buy or sell? If most people are looking to buy, then most probably, the market can still continue higher. But if it is the latter, then you can also expect the opposite outcome. I, for one, am looking to buy unless proven otherwise. Of course, failure to trend up or down will lead to an extended sideways trend.
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