Hi Mr. Germo,
“This is Jerome from London, England. I have been working here for 12 years now and I heard of your semianr in Dubai last August and I was planning to attend. However I was not able to get the leaves that I was planning to get so unfortunately I missed out on your technical analysis seminars. I hope you can come here to London soon. We are waiting for you to visit us and do Stock Smarts London! I have been a silent fan for the past 2 years! I love your mantra teaching people to fish instead of just giving them fish spoonfed! I think that’s the best way to invest! I just wanted to ask sir, given that PLDT is a stable company and it has dropped a lot already is it good to buy it? I just want your take from a technical analysis perspective sir on where the stock is headed. I believe this is something that I lack in my trading and investing as I seem to buy at the wrong time. I would love to hear input on this!
Looking forward to hear from you sir!”
Hi Jerome! Thank you so much for the email! I always cherish questions specially from our kababayan OFWs! It’s just an honor to be able to meet more of our heroes! You guys have played a central role in our progress and I just hope you guys invest more and more! Yes! As part of my plan, I will continue to travel and meet more kababayans for the next two years! Hoping we can do something sometime next year in either London or Dublin. I’ll keep you posted soon via the website!
As for your question, PLDT is a maturing company that is suffering from declining income growth (don’t get me wrong they as still earning a lot) and increasing capital expenditures. However the stock is still cash rich, it still is a defensive company and will continue to reap the benfits of the mobility market in the country. If you are a person looking for a stock that is less volatile, meaning you do not want aggressive upward and downward swings, this maybe a stock that would fit you. If you want passive returns from dividends this also is something that may fit you.
What’s good about the market now is that as the stock goes lower and if you are looking for dividends, your yield becomes higher.
Let’s look at what the charts would say and I will try to also simulate answers for our other readers, as I believe we have a good number of readers who do either invest, quick trade or position trade.
The General Trend
PLDT has been in a steady downtrend since September 2014. As the PSEi hit highs earlier this year this stock continued to drop further. As what I always say, a stock in a downtrend will continue to go down until proven otherwise. Reagardless if the stock is a blue chip company or not, every stock will get battered down when sellers dominate the market. So what we are seeing in PLDT now is something that is expected because the stock is in a downtrend. Whatever news that you see in TV or social media for the past few days just adds fuel to the negative sentiment and will just increase the selling pressure.
So if you would like to buy the stock for dividends, I would suggest that you wait for PLDT to reach a stable base first and has stopped from dropping. It’s nice to buy stocks cheap but not while they are dropping.
Zooming out, you would see that the stock broke another support level today.
I would personally watch this level first. If it fails to hold this price range, the stock may drop another 7.1% and go to 2,237. Representing a 7.1% decline ont the stock. Just for computation purposes, assuming PLDT gives a 155 Peso dividend next year, buying the stock at 2,237 gives you a dividend yield of 7%. The risk though is as the stock is still in a downtrend and we are not sure yet if the stock will still go down further.
What’s nice about it though is a lot of mutual funds will start buying TEL as it becomes lower as it will give them bigger dividend yields. When funds buy, demand picks up and the stock could possibly stop from falling. You also have to consider that Globe is now more expensive than TEL given Globe’s recent run up the past few months.
TEL and the PSEI
You also have to consider, that a drop to 2,237 from 2,428 represents a 7.1% drop in the stock. If this happens this will bring the PSEI lower as TEL has a big weight in the index.
What would prevent it from dropping lower?
If TEL, stays above 2,428, the stock may bounce back up to 2,632 and give you a 7.9% trading gain. For those who are into quick trades, you may try to buy at 2,428 and sell quickly at 2,632 specially now that the stock is oversold. You must be ready to cut and sell though if the stock fails to hold 2,428.
How about position traders?
The stock is still bearish, I would suggest that you still remain in cash if you are into position trading. The stock will escape the downtrend should TEL breakout of 2,835. That’s when you come in when there is a clear sign of a reversal and that the stock is out of the downtrend.
TEL is not a growth stock like most consumption stocks but it is a defensive stock that will give you a good source of dividends if you are into passive income and want to weather a bear market. However the stock is in a downtrend and if you want to time your entry properly you must follow the support and resistances that technical analysis can provide.
Thank you so much for you email. I hope this helps you in your trades and brings you closer to financial freedom. At the end of the day, I hope you use this as a reference only but ultimately you decide on how you conduct your buying and selling. As what I always say, it’s my biggest desire to see more Filipinos move from consumers to investors and I hope my website helps you with that dream! God bless you!
September 5: Manila – Stock Smarts Basics and Fundamental Analysis
September 12: Manila – Portfolio Management
September 17-23: Doha, Qatar – Tactical Technicals and Stock Market Boot Camp
October 31: Kuala Lumpur -Stock Smarts Basics, Technicals and Portfolio Management
November 7-8: Thailand -Stock Smarts Basics, Technicals and Fundamentals
November 28-29: Singapore -Stock Smarts Basics and Technicals
*Charts via Chart Nexus
*Pictures from Google Search