PSEi, 12/7/2007

Today, Friday, December 7, 2007, the PSEi closed at 3745, gaining 11.43 pts for the day and ending the week up 4.66%.

Looking at the weekly timeframe, this week’s advance confirms that the close of 2 weeks ago is a new support. Connect this with the August 2007 low and we get a new uptrend that is steeper than the redrawn June 2006 trendline.

Going to the daily timeframe, we see the minor downtrend line breached since Thursday by the upswing that started late November.

Bullish scenario. The next critical level continuous to be the 3896 resistance, a break above it improves the odds that the steeper August 2007 will prosper. If the breakout is successful, we are looking at a measured move and potential price objective of 4500. 

Bearish scenario. Selling pressure overwhelms buying interest near the 3896 area and drives the index to a break below the new August 2007 trendline. If this happens, the next critical area will be the June 2006 uptrend line.

This current indecision by the index will soon be forced to a resolution one way or the other. A look at the charts show that the steep angle of the new uptrend will intersect the 3896 resistance by the end of this year. So keep your ears glued to the ground and your nose facing upwind. There are only 2 ways this pattern is going to break and it will happen soon. If it breaks to the downside, odds are in favor of a longer consolidation period or reversal. If the coming week favors us with a breakout that stays above 4000 for at least 2 consecutive days, then it will be a good time to start initiating long positions. Cheers!

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