As projected the PSE index went back up after getting within the 7,400 to 7,580 range. The index gained +2.19% after closing at 7,723.60 last Friday. The strength of the index was caused by the waning of the probability of doing another interest rate hike by the US Fed.

This week though, markets all over the world (including the PSE) might be up for another roller coaster ride as US presidential candidates Hillary Clinton and Donald Trump are set to meet for the first time for a debate. This is exciting, this is going to be very entertaining but this could cause too much anxiety as well. At this point, analysts want Clinton to win over Trump. According to Ladenburg Thalmann Asset Management in New York, they would opt for a “known” Clinton over an “unknown” Trump. Wells Fargo, in a recent report, said that Clinton would have a “neutral” impact on financial markets while Trump will have a “slightly negative” impact.

So how will this US presidential election affect the PSE? It may once again make funds flow either in or out of America depending on the outcome. A few weeks back, the PSE lost some strength as foreign funds were selling because of the speculation that the US Fed will raise the interest rates for the second time this year. Given the size of these fund flows, it’s more than enough to influence a minuscule market such as the PSE.

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The PSE index found a support at 7,489 and given the +2.19% rise last week, 7,850 might be a potential resistance. Given the stance of analysts, if Clinton gains the upper hand, expect a breakout from 7,850 but if Trump takes the upper hand, expect a possible sideways movement between 7,490 to 7,850.

Despite the uncertainty that clouds the PSE, here are two index stocks that are worth looking at given their low-risk yet potentially high-reward nature (given their current price levels).

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BDO is just a few ticks above its support at P110. BDO is a buy at its current price. Ideal buy price though is P110. If things go wrong, cut losses below P110. BDO has a reward-to-risk ratio of 4:1, which means for every 1% of possible loss, the potential reward is 4%. Current resistance of BDO is roughly P120.

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LTG is inching closer towards its potential support at P16.20. Ideal thing to do about LTG is to post a buy order at P16.20 (P16.22 will do). Cut losses below P16.20. LTG has a reward-to-risk ratio of 6:1, which means for every 1% of possible loss, the potential reward is 6%. Possible resistance is P17.

Last week’s stock TEL gained +5.2% for the entire week last week.

Note: The opinion in this article is just good for the week and shouldn’t be used as a basis for decision making for a holding period of more than a week.


Article by Makoy Velasco, Certified Securities Representative
Any views or opinions represented in this blog are personal and belong solely to the columnist and do not represent those of people, institutions or organizations that the owner may or may not be associated with in professional or personal capacity, unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual.