2nd Half 2016 Technical Outlook

Presented by: Juan G. BarredoChief Technical AnalystCOL Financial Group Inc

Tech Outlook Overview

• Most world markets have turned around from a weak 2016 opening

• Up trends have returned but a number of indices and issues had shown short term extendedness

• These extended issues have recently introduced corrective drives

• We favor waiting for such corrections to conclude to present better trade windows…

• … as advancing trends may yet warrant continuation swings after appropriate corrections are carried out

• Philippines stands as one of the best performers YTD

• Emerging Markets have now caught up as we recently corrected

Global YTD PerformancePSEi vs World (YTD)

* As of Sept 1, 2016

Index YTD %

Emerging Market Idx +12.21%

Philippines – PSEi +11.80%

US – Sp500 +6.21%

Japan –Nikkei -11.07%

China – Shanghai Idx -13.45%

1) Take sight of a price range

2) Locate if prices stand on the higher end or lower end of the range

3) If on the higher band, then look to profit take; if on the lower band, look to buy

4) A slip below range lows will trigger a corrective sway

5) A push over corrective patterns may resuscitate the advance

Guide to our Review

Watching Highs and Lows

High

Low

High

Low

(profit take)

(buy backs)

High

Low

GLOBAL TECHNICALITEIS

US Market

(S) 2,161 - 2,120(R) 2,210 - 2,260

SP500

Sp500 is in an advancing channel; now stands closer to the upper half of its zone and closed in on OB levels

The Dow Jones is ranging in the short term and awaits a decision on its boundaries soon; must hold over 18,247 or breakout of 18,668

(S) 18,247 - 18,216(R)18,668

Dow Jones Industrial Ave.

US Bond Yields (precursor to Rates)

Fed Watch Tool (CME Group)US 10-Year Bond Yield (Weekly)

US 10-Yr Bond Yield (weekly) proceeds to angle down into the medium and long term; a short term oversold rally was in recent session

(S1) 1.48% (R1) 1.628%(S2) 1.336% (R2) 1.89%-1.94%

Target Rate(BPS)

September Probability

DecemberProbability

25-50 79% 45.8%

50-75 21% 43.5%

75-100 0% 10.2%

Such long term trends show that low rates will likely continue despite a possible rate hike which could just serve to show a brief rally

US DollarUS Dollar Index (Daily)

(S) 94.15 - 92.62(R) 97.46 – 98.20 * As of Sept1, 2016

US Dollar Index (Weekly)

(S) 92.62(R) 100.2

The US Dollar shows a medium/long term rectangular range

Its short term picture depicts a rallying channel which began after reaching major support; hold as long as support holds

NY Oil & Gold

(S) 41.42 – 39.51(R) 50.20 – 51.62

Oil has rallied substantially after finding a base of support on its Fibonacci 50% zone; it should now range between $50.20 - $39.51

Gold is now reacting to the lower end of its channel ($1,300); its moves will depend inversely on the US Dollar

OIL GOLD

(S) 1,300 – 1,270(R) 1,345 – 1,374

Emerging Markets & Europe

(S) 840(R) 930

Emerging Market Index (MSEMF) STOXX Europe 600 Index

Emerging Market index was trading closer to its high band and has reacted easing overbought levels; a consolidation may follow

The Stoxx European 600 index is also trading closer to its high band with momentum signals slowing; a sideways correction is ongoing

(S) 335 - 308(R) 346 - 350

PHILIPPINETECHNICALITIES

Challenges We Overcame

Interest Rate Hike

Falling Oil Prices

Philippine Elections

BREXIT

Dec 15 ‘15 Feb 15 ‘16 May 9 ‘16 Jun 23 ‘16

PSE INDEX

6,084

6,941

7,850!

Advancing trend may have broken; corrective sideways shift to follow

What next:US Rate HikeUS Elections ?

2016

Philippine PesoPhil Peso (Daily)

Support Line

(S) 46.05 – 45.97(R) 47.37 – 48.04 * As of Sept 2, 2016

Resistance Line

Phil Peso (Weekly)

(S) 45.73(R) 47.37

The Philippine Peso has gained some strength breaking below its sharper devaluating trendline

Now closer to the lower end of its consolidation range, it’s short term band stands between 47.37 (R) and 46.05-45.97 (S)

PSEi

(S) 6,320(R) 8,450

PSEi (Weekly) PSEi (Daily)

The PSEi weekly has taken a slower paced advancing channel after calling a Divergence note

The short term picture shows its 6-month rally trendline breaking; now consolidates as it looks for next support

(S) 7,532 – 7,330(R) 7,950 – 8,118

Sub-Index ReviewSome sub-indices have broken up trendlines

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PSEi – Principle of Alternation• Corrections alternate

in style types

• If a sharp correction has just previously been seen, the next would like be of a flat type, and vice-versa

• Given that we just we broke below 7,850:

Fibonacci Retracements

38.2% 7,330

50% 7,120

61.8% 6,905

Right Time, Right Action:

• We await for the conclusion of corrections:• Wait for pullbacks to next support (proximity to 65 or 130-

day MAs or major lows near this zone)

• Double bases or higher-lows may form

• Breaks over resistance of consolidation /reactive ranges may trigger revived activity

Reviewing our Stock PicksBDO Unibank (BDO)Ayala Land Inc (ALI)

ALI is reacting from its range highs, support estimates are at 38.00 first followed by 37.60 - 36.40

(S) 38.00 – 37.60/36.40(R) 40.30 – 42.15

BDO is correcting after breaking below its short term up trendline; better support is estimated between 110.60 to 106.40

(S) 110.60 – 107.25(R) 115.00 – 119.50/123.00

Reviewing our Stock PicksCebu Air Inc. (CEB) Concepcion Industrial Corp. (CIC)

(S) 115.00 /110.00-105.00(R) 125.00 – 133.00

(S) 56.00 – 52.70(R) 60.80 – 63.50

CEB has hit overbought levels and needs to react or consolidate. Support estimates (better buy back zones) are placed at 115 /110-105

CIC is consolidating after a quick pick up and may show better buys towards next support of 56.00-52.70. Can be prone to illiquidity

Reviewing our Stock PicksCentury Pacific Foods Inc. (CNPF) D & L Industries (DNL)

CNPF is correcting after losing upward momentum from overbought levels; a reaction closer to 16.50-15.10 may be anticipated

DNL is now building a small pattern after closing in on its channel highs; reactions to support (10.90-10.25) may open better buy windows

(S) 16.50 – 15.10(R) 17.30 – 18.60

(S) 10.90 – 10.25(R) 11.50 – 12.00

Reviewing our Stock PicksEnergy Devt Corp. (EDC) EEI Corp. (EEI)

EDC broke below a recovery channel and may shift sideways for the meantime; a range trade from its low band (5.67-5.50) to its high zone | (6.10-6.40) is preferred

EEI proved to be very soft in recent days and may attempt to test even lower levels of support (7.85-7.08) if its up trendline proceeds to break; Can be prone to illiquidity

(S) 5.67 – 5.50(R) 6.10 – 6.43

(S) 7.85 – 7.08 (R) 9.15 – 10.16

Reviewing our Stock PicksEast West Bank (EW)

EW has reached the high band of its channel and now makes its way to support at 20.30; if this breaks then next zones to watch are 19.50-18.60

FGEN seems to have broken its rallying trendline and now drifts sidewards; it stands near resistance of 26.20 and hosts support at 24.00 then 22.50

(S) 20.30 – 19.50/18.60(R) 22.30 – 23.55

(S) 24.00 – 22.50(R) 26.20 – 27.20

First Gen Corp. (FGEN)

Reviewing our Stock Picks

MBT has reacted and broken its up trendline... a sharp drop ensued but found support at 84.00 after seeing oversold conditions; a rally to 90.30-| 91.80 may follow

MPI broke its up trendline and activated a corrective channel; its rally looks temporary and may only revive if prices can overcome its channel highs

(S) 84.00 – 78.00 (R) 90.30/91.80 – 95.00

(S) 6.90 – 6.60(R) 7.32 – 7.60

Metro Pacific Inv. (MPI)Metrobank (MBT)

Reviewing our Stock Picks

RLC withdrew to major support (29.80) and has since bounced; but this rally may need another test of support to validate the strength of demand

SM pulled back to its major trendline after touching its channel high; it must try to keep itself over support (667); if this breaks, it may close in on 650-625

(S) 29.80 – 28.40(R) 33.00 – 34.00

(S) 667 – 625(R) 695 – 730

SM Investments Corp. (SM)Robinson Land Corp. (RLC)

Summary

• The PSEi had shown signs of overstretch

• Some issues may need appropriate time to consolidate or react

• Wait for pullbacks to the next levels of support or watch for more firm bases before scheduling buy backs

• The PSEi may need to close in on 7,530 or 7,330

• Range breaks over corrective patterns will be our trigger to re-activate markets into an advance

Thank You!

JUAN G. BARREDOCHIEF TECHNICAL ANALYSTJUANIS.BARREDO@COLFINANCIAL.COM

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